GATT

Definition

The General Agreement on Tariffs and Trade (GATT) is a multilateral treaty aimed at promoting international trade by reducing or eliminating trade barriers such as tariffs and quotas. Established in 1947, GATT was crucial in shaping the global trading system, laying the groundwork for subsequent trade negotiations and agreements that focused on liberalizing trade and fostering economic cooperation among countries.

5 Must Know Facts For Your Next Test

1. GATT was established to create a framework for international trade negotiations, leading to several rounds of negotiations aimed at reducing tariffs and other trade barriers.
2. The first round of GATT negotiations began in Geneva in 1947, resulting in commitments from 23 countries to lower tariffs on a wide range of goods.
3. Over its lifetime, GATT held eight negotiation rounds, with the most significant being the Uruguay Round (1986-1994), which eventually led to the creation of the WTO.
4. GATT operated on the principle of Most-Favored-Nation (MFN), meaning that any favorable trading terms offered by one member must be extended to all other members.
5. While GATT focused primarily on goods, it laid the foundation for future agreements that would also address services and intellectual property through the WTO framework.

Review Questions

• How did GATT contribute to the reduction of trade barriers among its member countries?
  • GATT played a significant role in promoting free trade by facilitating negotiations among its member countries to reduce or eliminate tariffs and quotas. Through various negotiation rounds, GATT established binding commitments for its members to lower their trade barriers, fostering a more open international trading environment. This collective effort helped countries gain access to new markets and improved global economic cooperation.
• Discuss the transition from GATT to the WTO and the implications this had for international trade regulation.
  • The transition from GATT to the WTO marked a significant evolution in international trade regulation. While GATT primarily focused on goods and tariff reductions, the WTO expanded its scope to include services and intellectual property rights, addressing a broader range of trade issues. The WTO also introduced more robust enforcement mechanisms, allowing for dispute resolution processes that enhanced compliance among member nations, thus making international trade more structured and predictable.
• Evaluate the effectiveness of GATT in achieving its goals of promoting global trade compared to its successor organization, the WTO.
  • GATT was effective in creating a platform for dialogue and negotiation among nations, significantly reducing tariffs and fostering international cooperation over several decades. However, its limitations included a lack of binding enforcement mechanisms and a focus primarily on goods. The WTO built upon GATT's achievements by introducing stronger enforcement capabilities and expanding its agenda to include services and intellectual property rights. This shift allowed for a more comprehensive approach to global trade regulation, leading to greater participation and compliance among member states.

Related terms

WTO: The World Trade Organization (WTO) is an international organization that replaced GATT in 1995 and governs global trade agreements, aiming to ensure that trade flows as smoothly, predictably, and freely as possible.

Tariffs: Tariffs are taxes imposed on imported goods, which are used by governments to generate revenue and protect domestic industries from foreign competition.

Trade Liberalization: Trade liberalization refers to the process of reducing or eliminating restrictions on trade, such as tariffs and quotas, to encourage free trade between countries.