Definition
The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty established in 1948. Its primary objective was to promote international trade by reducing or eliminating trade barriers such as tariffs, quotas, and subsidies. GATT provided a permanent forum for trade negotiations and operated through a series of trade negotiations known as ‘rounds’. The treaty lasted until it was replaced by the World Trade Organization (WTO) in 1995.
Historical Background
GATT emerged after World War II as part of the efforts to rebuild and stabilize the world economy. It was initially signed by 23 countries and later expanded to include 95 countries, with an additional 28 countries applying its rules de facto. GATT facilitated eight major rounds of trade negotiations to reduce trade barriers and settle trade disputes.
Key Rounds of Negotiation
- Geneva (1947): The first round where the initial agreement was signed.
- Annecy (1948): Further tariff negotiations were conducted.
- Torquay (1950): Continued tariff reductions.
- Geneva (1956): Another series of tariff reductions.
- Dillon (1960-61): Named after U.S. Undersecretary of State C. Douglas Dillon, focusing again on tariff reductions.
- Kennedy (1964-67): Introduced an anti-dumping agreement.
- Tokyo (1973-79): Addressed non-tariff barriers and established a range of trade agreements.
- Uruguay (1986-94): Led to the formation of the WTO and included extensive reforms covering trade in services, intellectual property, and agricultural subsidies.
Examples
- Reduction of Tariff Barriers: GATT facilitated negotiations that significantly reduced global tariffs on industrial goods, promoting more free trade among member nations.
- Trade Dispute Resolution: GATT mechanisms were used to resolve trade disputes, such as the Banana Wars, where European Union’s preferential treatment for banana imports from former colonies was contested by the United States.
Frequently Asked Questions
Q1: What was the primary goal of GATT? A1: The primary goal of GATT was to promote international trade by reducing or eliminating trade barriers like tariffs, quotas, and subsidies.
Q2: How many countries were part of GATT? A2: By the time it was replaced by the WTO, GATT had 95 contracting parties with 28 other countries applying its rules de facto.
Q3: When was GATT replaced by the WTO? A3: GATT was replaced by the World Trade Organization (WTO) on January 1, 1995, following the conclusion of the Uruguay Round.
Q4: What were the main areas covered in GATT negotiations? A4: GATT negotiations primarily covered tariff reduction, but also included non-tariff barriers, anti-dumping, subsidies, and later expanded to services and intellectual property.
Q5: Was GATT successful in achieving its objectives? A5: Yes, GATT was largely successful in achieving its goals, leading to significant reductions in trade barriers and promoting global trade. Its success laid the foundation for the establishment of the WTO.
Related Terms
- World Trade Organization (WTO): An international organization that regulates trade between nations, succeeding GATT in 1995.
- Tariff: A tax imposed on imported goods and services.
- Non-Tariff Barriers: Restrictions other than tariffs that countries use to control the amount of trade across their borders.
- Anti-Dumping: Measures to prevent foreign countries from selling goods at a price lower than their market value.
- Subsidy: A government incentive provided to support businesses or economic sectors.
Online Resources
Suggested Books
- “The GATT/WTO: Law, Economics, and Politics” by Petros C. Mavroidis - A detailed exploration of the GATT mechanism and its evolution into the WTO.
- “The Origins of International Economic Disorder: A Study of United States International Monetary Policy from WW II to the Present” by Fred L. Block - Provides context on how post-WWII economic policies shaped GATT.
- “Constitutionalism, Multilevel Trade Governance and Social Regulation” by Christian Joerges - Discusses the broader implications of trade governance frameworks including GATT and WTO.
Accounting Basics: General Agreement on Tariffs and Trade (GATT) Fundamentals Quiz
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