The General Agreement on Tariffs and Trade [GATT] was a legal agreement that aimed to reduce trade barriers by abolishing or lowering restrictions, taxes, and subsidies while retaining considerable restrictions. It was signed by 23 countries on October 30, 1947. It was established to aid the recovery of the world economy after the events of World War II. This was done by liberalising and rebuilding global trade.
General Agreement on Tariffs and Trade [GATT] Significance
Trading without prejudice was one of the GATT's major accomplishments. Every GATT signatory was to be regarded on an equal footing with the others. The most-favoured-nation principle has been carried over into the WTO.
As a result, once a nation had agreed on a tariff reduction with a few other countries (generally its most important trading partners), the same reduction would be applied to all GATT signatories. There were conditions in place, allowing nations to negotiate exclusions if tariff cuts would dramatically hurt domestic producers.
Fact About General Agreement on Tariffs and Trade [GATT]
The GATT was formed to establish regulations to abolish or limit the most costly and inefficient characteristics of the pre-war protectionist period, notably quantifiable trade barriers like trade controls and quotas. The pact also established a system for resolving international commercial disputes, as well as a foundation for multilateral tariff reduction initiatives. In the post-war era, the General Agreement on Tariffs and Trade [GATT] was seen as a remarkable success.
A series of meetings would be held to cut tariffs, with new GATT clauses added in the process. The average tariff rate declined from over 22% when the GATT was originally signed in Geneva in 1947 to about 5% by the completion of the Uruguay Round, which also discussed the establishment of the WTO, which ended in 1993.
The General Agreement on Tariffs and Trade [GATT] has a long and illustrious history (GATT)
Between April 1947 and December 1993, the GATT held 8 sessions of meetings.
The inaugural summit was held in Geneva, Switzerland, with 23 countries in attendance. Tariffs were the main topic of discussion at the inaugural press conference. The members agreed to tax breaks totalling more than $10 billion in global trade.
The second series of meetings was conducted at Annecy, France, beginning in April 1949. Tariffs were again the primary focus of discussion. At the second conference, thirteen countries achieved an extra 5,000 tax concessions, lowering tariffs.
The third series of GATT meetings began in Torquay, England, in September 1950. This time, 38 countries were participating, and nearly 9,000 tariff concessions were approved, lowering tax rates by up to 25%.
In 1956, Japan joined the General Agreement on Tariffs and Trade [GATT] for the first time, together with 25 other countries, at the fourth meeting. The conference took place in Geneva, Switzerland, where the committee once again slashed global tariffs, this time by US$2.5 billion.
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Why and When was GATT replaced with WTO?
There are several reasons for the World Trade Organisation(WTO) replacing the GATT, a global trade agreement adopted in 1947.
The World Trade Organisation replaced the GATT for the following reasons -
- The GATT lacked a well-defined Institutional framework. The World Trade Organization(WTO) embraces GATT's principles and provides a stronger institutional structure for executing and expanding them.
- The GATT was Ad Hoc and transitional, and it was never recognized by member countries' parliaments.
- The WTO and its accords are permanent, have a firm legal foundation, and have been adopted by member nation's parliaments.
- The GATT only dealt with goods commerce; the WTO also deals with services and intellectual property.
- WTO dispute resolution is faster, and its decisions are never overturned. Is GATT still in Effect?
The General Agreement on Tariffs and Trade [GATT] came into existence On January 1, 1948. It has been developed since then, culminating in the founding of the WTO or World Trade Organisation on January 1, 1995, which integrated and expanded it. By this time, 125 countries had signed on to its accords, which covered almost 90% of world trade.
FAQs on General Agreement on Tariffs and Trade [GATT]
Q1. What makes the WTO superior to the General Agreement on Tariffs and Trade [GATT]?
Ans. The WTO regulates both services and intellectual property. Compared to the old General Agreement on Tariffs and Trade [GATT] system, the WTO's dispute settlement procedure is more effective and automatic. It makes decisions that cannot be reversed.
Q2. With regards to General Agreement on Tariffs and Trade [GATT], what is the MFN principle, and how does it work?
Ans. A most-favoured-nation (MFN) clause requires a government to extend to all other WTO member countries any rights, concessions, or exemptions granted to one nation in a trade agreement. Even though its name implies a bias toward another country, it refers to the equitable treatment of all nations.
Q3. How many countries were members of the General Agreement on Tariffs and Trade [GATT]?
Ans. General Agreement on Tariffs and Trade [GATT] had 128 members by 1994.
Q4. How many sessions of General Agreement on Tariffs and Trade [GATT] took place between 1947 and 1993
Ans. Between April 1947 and December 1993, the General Agreement on Tariffs and Trade [GATT] held 8 sessions