GATT and WTO

General Agreement on Tariffs and

Trade (GATT)
• General Agreement on Tariffs and Trade (GATT) was a
multilateral agreement regulating international trade.
• According to its preamble, its purpose was the "substantial
reduction of tariffs and other trade barriers and the
elimination of preferences, on a reciprocal and mutually
advantageous basis."
• It was negotiated during the United Nations Conference on
Trade and Employment and was the outcome of the failure
of negotiating governments to create the International Trade
Organization(ITO).
• GATT was signed by 23 nations in Geneva on October 30,
1947 and took effect on January 1, 1948. It lasted until the
signature by 123 nations in Marrakesh on April 14, 1994 of
the Uruguay Round Agreements, which established
the World Trade Organization (WTO) on January 1, 1995.
 GATT-cont..
• The original GATT (GATT 1947) is still in effect under
the WTO framework, subject to the modifications of
GATT 1994.
• The formal membership of GATT and the WTO is based
on the customs territory (so, for example, both the EU
and Hong Kong are eligible), while the IMF, World
Bank, and Bank for International Settlements all have
different classes of members with financial criteria.
• The colonial empires differentiated economic rights and
obligations among their members. At the bilateral level,
most counties do not have economic representatives
(many do not even have diplomatic representatives) in
all countries. All these suggest that a purely nation-state
approach is not valid.
 Brief History of GATT
• Bretton Woods Conference at the end of the World
War II, finance ministers from the Allied nations
gathered to discuss creation of a new monetary system
that would support postwar reconstruction, economic
stability, and peace.
• 1944: At the Bretton Woods Conference, which created
the IBRD and IMF, there is talk of a third organisation,
the ITO.
• 1947: As support for another international organisation
wanes in the U. S. Congress, the General Agreement on
Tariffs and Trade is created. The Gatt Treaty Creates a
set of rules to govern trade among 23 member countries
rather than a formal institution.
 Brief History of GATT-Conti…
• 1950: Formal U.S. Withdrawal from the ITO concept as
the U.S. Administration abandons efforts to seek
congressional ratification of the ITO
• 1951 – 1986: Periodic negotiating rounds occur, with
occasional discussions of reforms of GATT. In 1980s,
serious problems with dispute resolutions arise.
• 1994: The Uruguay Round, a new round of trade
negotiations, is launched. This culminates in 1994 Treaty
that establishes the WTO.
• 1995: The WTO is created at the end of the Uruguay
Round, replacing GATT.
• 2009: The GATT consists of 153 members, accounting
for approximately 97% of world trade.
 GATT Trade Rounds
Year Place / Subjects Covered Countries
Name
1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960 – 1961 Dillon Tariffs 26

Round
1964 – 1967 Kennedy Tariffs and Anti-Dumping Measures 62
Round
1973 – 1979 Tokyo Tariffs, Non-tariff Measures, 102
Round Framework Agreements
1986 – 1994 Uruguay Tariffs, Non-tariff Measures, Rules, 123
Round Services, Intellectual Property, Dispute
Settlement, Textiles, Agriculture,
Creation of WTO
 World Trade Organization (WTO)
• The World Trade Organization (WTO) is an international
organization designed to supervise and liberalize international trade.
The WTO came into being on January 1, 1995, and is the successor
to the General Agreement on Tariffs and Trade (GATT), which was
created in 1947, and continued to operate for almost five decades as a
de facto international organization.
• The World Trade Organization deals with the rules of trade between
nations at a near-global level; it is responsible for negotiating and
implementing new trade agreements, and is in charge of policing
member countries' adherence to all the WTO agreements, signed by
the bulk of the world's trading nations and ratified in their parliaments.
 WTO-Cont…
• Most of the WTO's current work comes from the 1986-94
negotiations called the Uruguay Round, and earlier negotiations under
the GATT. The organization is currently the host to new negotiations,
under the Doha Development Agenda (DDA) launched in 2001.

• The WTO is governed by a Ministerial Conference, which meets

every two years; a General Council, which implements the
conference's policy decisions and is responsible for day-to-day
administration; and a director-general, who is appointed by the
Ministerial Conference. The WTO's headquarters are in Geneva,
Switzerland.
 Mission of WTO

• The WTO's stated goal is to improve the welfare of the peoples

of its member countries, specifically by lowering trade barriers
and providing a platform for negotiation of trade.
• Its main mission is "to ensure that trade flows as smoothly,
predictably and freely as possible".
• This main mission is further specified in certain core functions
serving and safeguarding five fundamental principles, which
are the foundation of the multilateral trading system.
 Functions of WTO
Among the various functions of the WTO, these are regarded by analysts as
the most important
– To oversee the implementation, administration and operation of the
covered agreements.
– To provide a forum for negotiations and for settling disputes.
– To review the national trade policies, and to ensure the coherence and
transparency of trade policies through surveillance in global economic
policy-making.
– To assist developing, least-developed and low-income countries in
transition to adjust to WTO rules and disciplines through technical
cooperation and training.
– The WTO is also a center of economic research and analysis.
– Finally, the WTO cooperates closely with the two other components of
the Bretton Woods system, the IMF and the World Bank.
 Principles of WTO (or GATT) Trading
System
1-Non Discrimination
It has two major components: the most favoured nation (MFN) rule, and the
national treatment policy. Both are embedded in the main WTO rules on
goods, services, and intellectual property, but their precise scope and nature
differ across these areas.
The MFN rule requires that a WTO member must apply the same conditions on
all trade with other WTO members, i. e. a WTO member has to grant the
most favorable conditions under which it allows trade in a certain product
type to all other WTO members. "Grant someone a special favor and you
have to do the same for all other WTO members.
"National treatment means that imported and locally-produced goods should be
treated equally (at least after the foreign goods have entered the market) and
was introduced to tackle non-tariff barriers to trade (e. g. technical standards,
security standards et al. discriminating against imported goods).
Principles of Trading System-Cont..
2-Reciprocity

– It reflects both a desire to limit the scope of free-

riding that may arise because of the MFN rule, and
a desire to obtain better access to foreign markets.

– A related point is that for a nation to negotiate, it is

necessary that the gain from doing so be greater
than the gain available from unilateral
liberalization; reciprocal concessions intend to
ensure that such gains will materialize.
 Principles of Trading System-Cont..

3. Binding and Enforceable Commitments

– The tariff commitments made by WTO members in a
multilateral trade negotiation and on accession are
enumerated in a schedules (list) of concessions. These
schedules establish "ceiling bindings": a country can
change its bindings, but only after negotiating with its
trading partners, which could mean compensating them
for loss of trade.
– If satisfaction is not obtained, the complaining country
may invoke the WTO dispute settlement procedures.
 Principles of Trading System-Cont..
4. Transparency
– The WTO members are required to publish their trade
regulations, to maintain institutions allowing for the review
of administrative decisions affecting trade, to respond to
requests for information by other members, and to notify
changes in trade policies to the WTO. These internal
transparency requirements are supplemented and facilitated
by periodic country-specific reports (trade policy reviews)
through the Trade Policy Review Mechanism (TPRM).
– The WTO system tries also to improve predictability and
stability, discouraging the use of quotas and other measures
used to set limits on quantities of imports.
 Principles of Trading System-Cont..

5. Safety Valves
– In specific circumstances, governments are able to
restrict trade. There are three types of provisions in
this direction:
• articles allowing for the use of trade measures
to attain non economical objectives;
• articles aimed at ensuring "fair competition"; an
• provisions permitting intervention in trade for
economic reasons.