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GATT

On 15 May 2006 the General Council decided to make public all official documents issued under the General Agreement on Tariffs and Trade (GATT). Many of these documents did not exist electronically, and have been scanned to create a digital archive. This is a work in progress cataloguing is not completed, and refinements to structure and help files will be added at a later date. Of the roughly 88,000 documents issued under GATT, about 51,000 are available through the links below.

General Agreements on Tariffs and Trade


1. GATT Toward the end of World War II, representatives of the US and its Allied Forces endeavored to work out the arrangements for new world order in the post war era. As a result of these negotiations, after World War II the US and its Allies planned to establish three important international institutions to liberalize trade and payment. (i) International Monetary Fund (IMF) was established to facilitate international payments. (ii) International Bank for Reconstruction and Development. After the War, European countries and Japan

Three institutions + UN

had to rebuild their production plants; this meant that these countries required a large amount of foreign capital. To encourage free flow of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established. (iii) To facilitate free trade, International Trade Organization (ITO) was to be born. (iv) As a political complement to these institutions, United Nations was also established in 1945 to replaced the League of Nations.

GATT was the result of an international conference held at Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates. What is GATT Technically, GATT was viewed as an agreement under the provisions of US Reciprocal Trade Act of 1934, and hence did not require approval of Congress. It was considered a provisional agreement that would be replaced once the ITO became operational to take over its functions.

So GATT began its provisional existence on January 1, 1948, when 23 contracting parties signed the agreement. However, US Congress refused in 1950 to ratify the treaty establishing the ITO.

2. Major Provisions of GATT (i) GATT obligates each country to accord nondiscriminative, most favored nation (MFN) treatment to all other contracting parties with respect to tariffs. 1. Tariff (ii) MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to tariffs or quotas. MFN treatment means that no other countries with some exceptions receive better treatment or lower tariffs. (i) Existing tariff preferences such as those between British Commonwealth. Exceptions to MFN (ii) GATT/WTO allows the formation of customs union, which causes a significant erosion of the MFN principle. (iii) An escape clause allows any contracting party to withdraw or modify tariff concessions, if it

threatens a serious injury to domestic producers. 2. Quantitative Restrictions GATT in general prohibits the use of quantitative restrictions on imports and exports. (i) agriculture - when government needs to remove surplus of agricultural and fisheries products. Important to US (ii) balance of payments - to safeguard balance of payments. If a country's foreign exchange reserve is low. (iii) Developing countries - LDCs may use import quotas to encourage infant industries. (iv) National Security- Strategic controls on certain exports. Patents, Copyrights, Public Morals 3. Developing Countries Special Provisions to promote the Trade of Developing Countries. In 1965, the contracting parties added Part IV (Trade and Development) to GATT. (i) Developed economies will give high priority to reduction/elimination of tariffs on products of LDCs. (ii) refrain from introducing tariffs and NTBs to such imports. (iii) refrain from imposing internal taxes to

Exceptions

discourage consumption of primary products from LDCs (iv) not expect reciprocal commitments from LDCs. Provisions to eliminate concealed protection such as customs valuation. For example, American Selling Price valuation. By ASP, an ad valorem tariff is imposed on the domestic price. procedural matters: each member is entitled to one vote, decisions are made by majority vote. 2/3 majority is required to waive obligations. settlements of disputes.

Other provisions

3. Achievements and Problems of GATT GATT has enjoyed a membership of over 100 countries and generated about 85-90% of world trade. Achievements (i) trade liberalization in industrial products (Kennedy Round) (ii) Adopted codes on NTBs (Tokyo Round) (iii) No world wars since 1948 (Choi: Increased trade promotes world peace) Problems (i) failed to liberalize trade in agricultural products to any significant degree. This was one of the major

goals of the Uruguay Round. (ii) has experienced partial success in regulating trade practices adopted by member countries in response to BP difficulties. For example, in 1971 the US imposed a 10% surcharge on its imports, thereby doubling its average duties. (iii) steady erosion of MFN principle by the EU, and to a less extent by the NAFTA. Article 24 permits member countries to form a CU or FTA. The EU adopted VILs to keep out agricultural products, lowered duties to many African and Mediterranean countries, which are not extended to other GATT contracting parties. (iv) has condoned managed trade for textiles, largely because of pressure from the US, and automobiles (VERs) GATT was an executive agreement under the Protocol of Provisional Application. It was only a gentlemen's agreement with no teeth, no enforcement power to discipline parties that violate the rules. Moreover, contracting parties are not obligated to observe rules that are inconsistent with their domestic laws at the time of entry into GATT. Many countries sidestep or bypass the rules by

narrowly defining commodities for tariff purposes. (v) WTO has not done anything to eliminate pirate activities in Africa. (vi) WTO has not been able to regulate currency manipulation as a protective instrument to restrict imports.

4. Trade and Diminishing National Sovereignty A country is presumed to have full sovereignty over its citizens within its territory. Any foreign governments or entities that say any negative things on domestic regulations or problems have been criticized for meddling with internal or domestic politics. This was so at least until GATT was formed in 1948, and GATT was transformed into WTO in January 1995. Members of WTO are agreeing to abide by the rules of WTO, and hence allowing WTO to monitor domestic laws that may be in conflict with trade rules set by the WTO. Similarly, members of International Monetary Fund also allow the Funds surveillance of their exchange rate practices. Thus, increased trade is gained only through reduced

Sovereignty in autarky

Internatinal Organizations encroach on national sovereignty

national sovereignty. Gains from trade often forces member countries to sacrifice some national sovereignty. For example, Indias patent laws allowed counterfeit copies of drugs without requiring license fees, which made Indian drugs available at low cost to the mass. Now India overturned its Patent Laws for all medicines invented since 1995. This shows Indias attempt to make their internal laws consistent with the rules of WTO. WTO not only governs trade of goods, but also services and foreign direct investment. Similarly, IMF monitors exchange practices that harm other member countries. Increased trade will continually exert its pressure to harmonize disparate domestic laws on the movement of goods, services and people. This inexorable process, in my opinion, will continue until nations have formed one world government that not only regulates trade, investment, and the movement of people but also harmonizes all aspects of human rights in the world economy. Trading countries are mutually interlocked and their economies are so intertwined that it becomes increasingly difficult for one member country to wage war against others. Global peace can be guaranteed only after one world government is established much as the presence of the Federal

Example

Services and Foreign Direct Investment

government eliminates civil war in the United States. WTO, IMF and the United Nations may prove to be just stepping stones that lead to one world goverment that may be formed by the end of this century. Most likely, citizens of trading nations will speak one common international language and their own national languages. Greece' problem EU monitors Greece's economic policies, and encourages the Greek government to reduce its budget deficit.

China and the GATT/WTO

China was one of the 23 founding members of GATT. became a contracting party on May 21, 1948. The Kuomintang Government moved to Taiwan and withdrew from the GATT, May 5, 1950. In 1982, China was granted observer status in GATT. In June 1986, China requested "resumption" of its contracting party status, on the basis that the withdrawal (by the Kuomintang) was null and void. In May 1987, the GATT established the Working Party on China's Status China became a member of WTO in December 2001.

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