General Agreement on Tariffs and Trade (GATT) Definition

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General Agreement On Tariffs And Trade (GATT) Definition

The General Agreement on Tariffs and Trade (GATT) is a multilateral trade agreement signed by 23 countries for promoting international free trade. The concept of such an agreement was first discussed in the conference of the United Nations on Trade and Employment. The agreement was signed in Geneva on October 30, 1947, between the 23 nations and it came into effect from January 1, 1948. The purpose of the agreement was to promote international trade of goods, services, and intellectual properties by reducing or eliminating the tariffs, duties, and quotas. As the negotiation to create the International Trade Organization (ITO) was failed in 1950, the GATT remained the only multilateral instrument governing international trade till it was diluted in 1995 after the creation of the World Trade Organization (WTO).It managed to reduce the average tariffs on manufactured products from 40 percent to around 5 percent in the developed nations.

A Little More on What is GATT

The GATT was designed and conceptualized for recovering the economy from the devastating effect of World War II. As described in its preamble the purpose of the GATT was the “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis.”

When the GATT was signed in 1947, it was considered to be an interim arrangement before the creation of a United Nations agency to look over the international trading. After GATT was signed and came into effect, the ITO charter was agreed in Havana in March 1948 but some of the nations refused the ratification in their national legislatures. The strongest opposition came from the United States. In 1950, the United States declared it would not seek Congressional ratification of the Havana Charter and with this declaration the creation of ITO became impossible. After that, the importance of GATT was amplified as an effective instrument for promoting free international trade.

A rule-based multilateral trading system was employed by the GATT through a series of negotiations, known as rounds. A total number of eight rounds were held between April 1947 and September 1986.

Geneva round (1947): The first round was held in Geneva, Switzerland in 1947 with 23 countries. The agreement was signed in this round and it managed to establish 45,000 tariff concessions affecting $10 billion of trade.

Annecy round (1949): The second round was held in Annecy, France in 1949. Tariff reduction was the main focus of the round and 5,000 more tariff concessions were exchanged. In this round, 10 more countries signed the General Agreement.

Torquay round (1950): This round occurred in Torquay, the UK in 1950, again with a focus on tariff reduction. The round managed to agree upon nearly 9,000 tariff concessions and reduced many tax levels by up to 25%. 38 nations were involved in this round.

Geneva round (1955-1956): This GATT round was again held in Geneva, Switzerland. This round started in 1955 and lasted till 1956. In this round, Japan participated in the GATT for the first time. $2.5 billion tariffs were reduced or eliminated in this round.

Dilon round (1960-1962): This round was again held in Geneva, from 1960 to 1962. The talks were named after Douglas Dillon, U.S. Treasury Secretary and former Under Secretary of State as he first proposed the talks. 26 countries participated in this round and it managed to eliminate an additional $4.9 billion in global tariffs.

Kennedy round (1962-1967):  The GATT rounds were getting more complicated and lengthier with time. This round saw a participation of more than 60 countries, while the open ceremony was attended by the 66 nations. This round was named after the U.S. President John F. Kennedy, who died the previous year. Near $40 billion tariff reduction was achieved in this round. This round also discussed new trade rule, like the anti-dumping measure.

Tokyo round (1973-1979): This round was launched at a ministerial meeting in Tokyo and for the first time it moved outside Europe. However, after the inauguration, the hard bargaining took place in Geneva. A total of 102 countries participated in this round. This round achieved substantial reductions in customs duties. Many non-tariff barriers were discussed but only some of the participants agreed to sign on it. It is known as the Tokyo round codes. Concession of $19 billion was achieved in this round.

Uruguay Round (1986-94): This round was launched in Uruguay, first GATT round in a developing country. By that time developing countries were the majority in the GATT and in this round, they took an unprecedented active role. After the launch, it again moved to Geneva. Property, agriculture and dispute settlement was discussed in this round. This round finally led to the formation of the World Trade Union.

Reference for GATT

Academic Research on the General Agreement on Tariffs and Trade (GATT)

  • China and the GATT: legal and policy issues raised by China’s participation in the General Agreement on Tariffs and Trade, Herzstein, R. E. (1986). Law & Pol’y Int’l Bus., 18, 371. In July 1986, the People’s Republic of China expressed its willingness to rejoin the General Agreement on Tariffs and Trade. This article argues, that China’s inclusion in GATT would have its implications on international trade and relations. The article discusses the benefits of GATT membership for China and its implications on other member countries. It also proposes some methods to make China obligated under the GATT.
  • The Inclusion of a Trade Related Intellectual Property Code Under the General Agreement on Tariffs and Trade (GATT), Mall, D. (1990). Santa Clara L. Rev., 30, 265. This paper explores how GATT can become an appropriate instrument for establishing a new system for the international protection of intellectual property. It proposes a framework for a new regulation for such protection under the GATT. The proposed code is based on effective regulations and represents the minimum standard. The framework also includes the provision of dispute resolution if any country infringes the GATT set standard. It aims to build up a set of regulation for reconciling differences between developed countries and LDCs based on a uniform code of conduct to protect the intellectual property right abroad.
  • The General Agreement on Tariffs and Trade (GATT): Has Agriculture Doomed the Uruguay Round, MacNabb, L., & Weaver, R. (1991). Land & Water L. Rev., 26, 761. This article explores whether the inclusion of agriculture in the General Agreement on Tariffs and Trade in its Uruguay round is adversely affecting the talks and making it more complicated and difficult to reach a consensus.
  • The Principles of a New International Economic Order and the Law of the General Agreement on Tariffs and Trade (GATT), Verwey, W. D. (1990). Leiden Journal of International Law, 3(2), 117-142. This study examines to what extent the legal practices of the GATT conforms with the fundamental principles of the New International Economic Order which are protecting the economic interests of developing countries, giving preference to the developing economies and establishing non-reciprocity in the relationship between developed and developing countries. The study observes although substantial efforts are made to implement these NIEO fundamentals so far only a few true preferential rights have been provided to the developing nations.   
  • The GATT–EEC Collision: The Challenge of Regional Trade Blocs to the General Agreement on Tariffs and Trade, 1950–67, McKenzie, F. (2010). The International History Review, 32(2), 229-252. The paper explores the challenges faced by the General Agreement on Tariffs and Trade from 1950 to 1967 from the regional trade blocs focusing on the conflict of the GATT and European Economic Community.
  • Market reaction of Multinational corporations to the Passage of the General Agreement on Tariffs and Trade (GATT), Ghani, W. I., & Haverty, J. L. (1998). Journal of International Accounting, Auditing and Taxation, 7(1), 95-112. This study explores how the stock market reacted to the passage of the General Agreement on Tariffs and Trade. It uses the data from both types of U.S. multinational, those who were positive about GATT and those who were negative about it in their public disclosure.  In this study, the impact of the passage of GATT on the wealth of shareholders is measured with empirical evidence. It also measures the stock market’s perception of how GATT may affect the future development of multinational corporations. The suggests similar studies could be conducted in other GATT signatory countries to measure the wealth effects of GATT in those countries.
  • The General Agreement on Tariffs and Trade (GATT), the European Economic Community (EC) and Agriculture, Basile, E. R. (1992). Tulsa LJ, 28, 741. This paper analyzes the problems of adopting an agricultural policy in the Uruguay round of the General Agreement on Tariffs and Trade. The paper discusses the difficulties to reach a solution, avoiding the conflicts of interest between different countries. It also observes that the extremely heterogeneous nature of world agriculture, on which different levels of average earnings per capita depend is also an important aspect to be taken into account while adopting a policy. It further discusses the complex relationship between national politics and international economics and how it disrupts agriculture’s traditional appearance of a simple intersection between the national economies.
  • Analysis of the importance of general agreement on tariffs and trade (GATT) and its contribution to international trade, Ayenagbo, K., Kimatu, J. N., Jing, Z., Nountenin, S., & Rongcheng, W. (2010). Journal of Economics and International Finance, 3(1), 13-28. This review analyzes the contributions of the General Agreement on Tariffs and Trade 1947 in international trade after discussing the institution itself. The paper concludes, at least in theory the GATT has controlled 80% of world trade and managed to survive until its substitution by the WTO. The review observes GATT has played a predominant role in international trade for more than 40 years and has successfully settled multiple trade disputes between the contracting parties. It further observes that GATT has made enormous efforts to facilitate access for developing countries to markets of industrialized countries. However, the paper argues, GATT is responsible for the deterioration of terms of trade of developing countries.  
  • The General Agreement on Tariffs and Trade (GATT) and the Law of the Sea (LOS) Convention: a critical comparison of arbitration provisions, Mounteer, T. R. (1987). The International Lawyer, 989-1012. This paper presents a critical comparative study of the arbitration provisions of the General Agreement on Tariffs and Trade and the Law of the Sea Convention. The paper asserts these two agreements contain extremely comprehensive and complex dispute settlement mechanisms and frameworks for arbitration in each of these two agreements are of great importance. The paper suggests that these two frameworks provide a paradigm of drafting how the arbitration provisions should be written in the multilateral agreement.  
  • The general agreement on tariffs and trade (GATT): implications for consumer products marketing, Tucci, L. A. (1996). Journal of Consumer Marketing, 13(1), 35-61. This paper analyzes the marketing implications of GATT. The paper starts with background information regarding GATT and an overview of the key provisions. It tries to gauge the potential industry-specific impact of GATT on the “offensive” and “defensive” marketing strategies by analyzing different consumer product industries.

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