General Agreement on Tariffs and Trade
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What is the General Agreement on Tariffs and Trade (GATT)?
The General Agreement on Tariffs and Trade (GATT) was a set of multilateral trade agreements created to abolish quotas and reduce tariff duties among contracting nations. It was signed by 23 countries in Geneva on October 30, 1947, and became effective on January 1, 1948.
GATT's most important principle was that of trade without discrimination, in which each member nation opened its markets equally to every other. By the time GATT was replaced by the World Trade Organization (WTO) in 1995, 125 nations were signatories to its agreements, which had become a code of conduct governing 90 percent of world trade.
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Why was GATT created?
The General Agreement on Tariffs and Trade (GATT) was created to reduce trade restrictions and promote international trade cooperation after the surge in protectionism between World War I and World War II. Signed in 1947 by 23 countries, GATT aimed to abolish quotas and reduce tariff duties among member nations. It served as an interim arrangement, pending the creation of a United Nations agency, which never materialized. Over time, GATT expanded, becoming a key instrument in liberalizing world trade and substantially increasing it in the latter half of the 20th century. By 1995, 125 nations had signed GATT agreements, which regulated 90% of global trade before the World Trade Organization (WTO) replaced GATT.
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How did GATT help countries with trade?
The General Agreement on Tariffs and Trade (GATT) was crucial in helping countries with trade by removing quotas and lowering tariff duties among member nations. A key principle of GATT was ensuring trade without discrimination, meaning each member offered equal market access to all other members. This was achieved through unconditional most-favored nation clauses, where tariff reductions agreed upon with major trading partners were automatically extended to every GATT member. By 1995, GATT had 125 member nations and covered 90% of world trade, proving its effectiveness in expanding global commerce during the latter half of the 20th century.
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What are tariffs, and how did GATT deal with them?
A tariff is a tax imposed on goods crossing national borders, typically by the importing country's government. They can be protective, shielding domestic producers from foreign competition, or revenue-producing, designed to generate income, but often serve both purposes.
The General Agreement on Tariffs and Trade (GATT) was created to reduce tariffs and eliminate trade quotas among member nations. Through multiple negotiation rounds, GATT significantly lowered average tariffs on industrial goods. The Uruguay Round at this time also slashed tariffs and created the World Trade Organization (WTO) to regulate international trade.
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Who were some of the main members of GATT?
The General Agreement on Tariffs and Trade (GATT), established in 1947 by 23 countries, including the United States, the United Kingdom, France, Belgium, and the Netherlands, aimed to reduce tariffs and eliminate trade quotas. By 1995, GATT had expanded to include 125 nations, governing 90% of global trade.
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How did GATT lead to the creation of the World Trade Organization (WTO)?
The General Agreement on Tariffs and Trade (GATT) was established in 1947 to reduce tariffs and abolish quotas among member nations. It was intended as a temporary measure, but it became the primary international trade agreement when the International Trade Organization (ITO) failed to materialize.
Over time, GATT evolved through multiple negotiation rounds. The Uruguay Round (1986-1994) was the most ambitious, resulting in tariff cuts, reduced agricultural subsidies, and new agreements on trade in services. Concluding the Uruguay Round on April 15, 1994, GATT was replaced by the World Trade Organization (WTO), which adopted GATT's principles and trade agreements.
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General Agreement on Tariffs and Trade (GATT), set of multilateral trade agreements aimed at the abolition of quotas and the reduction of tariff duties among the contracting nations. When GATT was concluded by 23 countries at Geneva, in 1947 (to take effect on Jan. 1, 1948), it was considered an interim arrangement pending the formation of a United Nations agency to supersede it. When such an agency failed to emerge, GATT was amplified and further enlarged at several succeeding negotiations. It subsequently proved to be the most effective instrument of world trade liberalization, playing a major role in the massive expansion of world trade in the second half of the 20th century. By the time GATT was replaced by the World Trade Organization (WTO) in 1995, 125 nations were signatories to its agreements, which had become a code of conduct governing 90 percent of world trade.
GATT’s most important principle was that of trade without discrimination, in which each member nation opened its markets equally to every other. As embodied in unconditional most-favoured nation clauses, this meant that once a country and its largest trading partners had agreed to reduce a tariff, that tariff cut was automatically extended to every other GATT member. GATT included a long schedule of specific tariff concessions for each contracting nation, representing tariff rates that each country had agreed to extend to others. Another fundamental principle was that of protection through tariffs rather than through import quotas or other quantitative trade restrictions; GATT systematically sought to eliminate the latter. Other general rules included uniform customs regulations and the obligation of each contracting nation to negotiate for tariff cuts upon the request of another. An escape clause allowed contracting countries to alter agreements if their domestic producers suffered excessive losses as a result of trade concessions.
GATT’s normal business involved negotiations on specific trade problems affecting particular commodities or trading nations, but major multilateral trade conferences were held periodically to work out tariff reductions and other issues. Seven such “rounds” were held from 1947 to 1993, starting with those held at Geneva in 1947 (concurrent with the signing of the general agreement); at Annecy, France, in 1949; at Torquay, Eng., in 1951; and at Geneva in 1956 and again in 1960–62. The most important rounds were the so-called Kennedy Round (1964–67), the Tokyo Round (1973–79), and the Uruguay Round (1986–94), all held at Geneva. These agreements succeeded in reducing average tariffs on the world’s industrial goods from 40 percent of their market value in 1947 to less than 5 percent in 1993.
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The Uruguay Round negotiated the most ambitious set of trade-liberalization agreements in GATT’s history. The worldwide trade treaty adopted at the round’s end slashed tariffs on industrial goods by an average of 40 percent, reduced agricultural subsidies, and included groundbreaking new agreements on trade in services. The treaty also created a new and stronger global organization, the WTO, to monitor and regulate international trade. GATT went out of existence with the formal conclusion of the Uruguay Round on April 15, 1994. Its principles and the many trade agreements reached under its auspices were adopted by the WTO.