GATT

Definition

The General Agreement on Tariffs and Trade (GATT) is a multilateral treaty established in 1947 aimed at promoting international trade by reducing tariffs and other trade barriers. It served as a forum for trade negotiations among member countries, fostering a rules-based trading system that encouraged economic cooperation and stability in the global market.

5 Must Know Facts For Your Next Test

1. GATT was initially signed by 23 countries in 1947 and aimed to create a more stable and predictable trading environment in the aftermath of World War II.
2. The agreement was based on key principles like Most-Favored-Nation (MFN) treatment and National Treatment, ensuring that all member nations were treated equally in terms of trade advantages.
3. GATT rounds of negotiations, such as the Tokyo Round and the Uruguay Round, led to significant tariff reductions and expanded the agreement's coverage to include services and intellectual property.
4. The Uruguay Round (1986-1994) was particularly important as it resulted in the establishment of the WTO, which built upon GATT's framework while introducing new areas of trade regulation.
5. GATT's role has evolved over time, transitioning from a temporary agreement to a foundation for modern global trade governance under the WTO.

Review Questions

• How did GATT facilitate international trade negotiations among its member countries?
  • GATT facilitated international trade negotiations by providing a structured forum where member countries could discuss and agree on trade rules. The treaty's principles, such as Most-Favored-Nation treatment, ensured that all countries received equal trading rights, thereby promoting fairness in trade. Additionally, regular rounds of negotiations allowed for systematic discussions on tariff reductions and the resolution of trade disputes, leading to an overall increase in international cooperation.
• Evaluate the impact of GATT on global trade policies and how it paved the way for the creation of the WTO.
  • GATT significantly impacted global trade policies by establishing a framework that promoted tariff reductions and fostered cooperation among member states. Its structured rounds of negotiations led to considerable progress in lowering trade barriers and addressing issues related to non-tariff barriers. The culmination of these efforts during the Uruguay Round not only expanded GATT's reach but also resulted in the establishment of the WTO, which further formalized and modernized global trade governance by including new areas such as services and intellectual property.
• Analyze how GATT's principles have influenced contemporary international trade agreements beyond its original scope.
  • GATT's principles have had a lasting influence on contemporary international trade agreements by laying down foundational concepts such as non-discrimination, transparency, and reciprocity. These principles continue to be integral in negotiations involving regional trade agreements and bilateral treaties. Furthermore, the emphasis on reducing trade barriers has prompted countries to engage in more comprehensive discussions that encompass not just tariffs but also regulatory standards and environmental concerns, reflecting an evolving understanding of global interdependence in trade.

Related terms

WTO:

The World Trade Organization (WTO) is the successor to GATT, established in 1995, which expanded the scope of trade agreements to include services and intellectual property rights, providing a more comprehensive framework for global trade governance.

Tariffs: Tariffs are taxes imposed on imported goods, which can be used to protect domestic industries or generate revenue for the government; GATT sought to reduce these barriers to encourage free trade.

Trade Liberalization: Trade liberalization refers to the process of reducing restrictions on international trade, including tariffs and quotas, aimed at promoting free trade and increasing economic efficiency.