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MKT 412

T2
What is the difference between GATT and WTO?
The General Agreement on Tariffs and Trade (GATT), is one of the major
multilateral agreements that regulate international trade. This was
established in 1947, after the World War II, and lasted only until 1994. This is
because it has been replaced by WTO in 1995. Its establishment seemingly
served as a makeshift solution since the UN Conference on Trade and
Employment that time was not able to make an International Trade
Organization (ITO). According to Yu (1999), the main purpose of creating the
GATT was in order to commit countries in upholding the principle of nondiscrimination and reciprocity, when it comes to trade.
There are two types of promises, these promises involve acceptance of
certain principles of behavior with respect to international trade policies. The
first involves core principles regarding nondiscrimination and the second
involves allowable exceptions to these principles. Firstly, there are two
applications of nondiscrimination: most-favored nation and national
treatment. Most-favored nation (MFN) refers to the nondiscriminatory
treatment toward identical or highly substitutable goods coming from two
different countries. National treatment refers to the nondiscriminatory
treatment of identical or highly substitutable domestically produced goods
with foreign goods once the foreign products have cleared customs. Thus it is
allowable to discriminate by applying a tariff on imported goods that would
not be applied to domestic goods, but once the product has passed through
customs it must be treated identically. This norm applies then to both state
and local taxes, as well as regulations such as those involving health and
safety standards. Secondly, there are several situations in which countries
are allowed to violate GATT nondiscrimination principles and previous
commitments such as tariff bindings. These represent allowable exceptions
that, when implemented according to the guidelines, are GATT legal. The
most important exceptions are trade remedies and free trade area
allowances. Trade remedies are laws that enable domestic industries to
request increases in import tariffs that are above the bound rates and are
applied in a discriminatory fashion. They are called remedies because they
are intended to correct for unfair trade practices and unexpected changes in
trade patterns that are damaging to those industries that compete with
imports. When an FTA is formed, the most liberal policy will become a zero
tariff, or free trade. However, the original GATT carved out an exception to
this rule by including Article 24. Article 24 allows countries to pair up and
form free trade areas as long as the FTA moves countries significantly close
to free trade and as long as countries notify the GATT or WTO of each new

agreement. The simple logic is that an FTA is in the spirit of the GATT since it
does involve trade liberalization. (Suranovic, 2012)

The World Trade Organization (WTO) is the only international


organization dealing with the global rules of trade between nations. Its main
function is to ensure that trade flows as smoothly, predictably and freely as
possible. Where countries have faced trade barriers and wanted them
lowered, the negotiations have helped to open markets for trade. But the
WTO is not just about opening markets, and in some situations its rules
support maintaining trade barriers such as, to protect consumers or prevent
the spread of disease. Besides WTO agreements, negotiated and signed by
the bulk of the worlds trading nations. These documents provide the legal
ground rules for international commerce. They are essentially contracts,
binding governments to keep their trade policies within agreed limits.
Although negotiated and signed by governments, the goal is to help
producers of goods and services, exporters, and importers conduct their
business, while allowing governments to meet social and environmental
objectives. The systems main purpose is to help trade flow as freely as
possible. (wto.org, 2015)
To help its member in ensuring the smooth progress of various
negotiations and even to ensure the correct application and enforcement of
rules concerning international trader, WTO has five main functions, which are
trade negotiations, implementation and monitoring, dispute settlement,
building trade capacity, and outreach. (WTO, 2013) Trade negotiations cover
agreements on goods, services and intellectual property. Specifically, WTO,
through this authorization, deals with ensuring the commitment of every
member states to lower their customs tariffs and even other barriers of trade.
Of course, these are in sync with the agreements of the members, which are
being reviewed regularly. According to the WTO agreements, implementation
and monitoring showed its members are required to make their trade policies
transparent. This is being done by notifying the WTO on the laws or measures
that the members adopt. All of the members of the WTO are required to
undergo regular scrutiny of their policies and practices related to trade.
Under dispute settlement, even though that WTO has some established
procedures and guidelines, there might still come a time when trade quarrels
may arise. It is in this light that the members are covered by the Dispute
Settlement Understanding, which provide for rules in settling disputes. This
usually happens, most especially when a member thinks that their rights
under their specific agreements are being violated. The judgments will be
made by the appointed independent experts. Under building trade capacity,
WTO agreements also have some special provisions concerning developing
countries in order to increase opportunities for their trading and supporting

them boost their trading capacity. Aside from that, the Organization is also
assisting these countries in handling disputes, as well as implementing
technical standards. These are being through annual courses offering that
aim to develop the countries skills and infrastructure requirements. Lastly,
Outreach is one of the functions that for WTO maintains regular dialogue with
non-governmental organizations, parliamentarians, other international
organizations, the media and the general public on various aspects of the
WTO and the ongoing Doha negotiations, with the aim of enhancing
cooperation and increasing awareness of WTO activities. (wto.org, 2015)