GATT

• Bretton Woods Conference

• In the year 1944
• After World War II
• Two Economists
• Harry White (USA) and
• John Maynard Keynes (UK)
• 730 delegates
• 44 countries
• Venue: Mount Washington hotel,
Bretton Woods,
• New Hampshire, USA.
Aim
• Establishing a forum for
discussion for avoiding future
wars and

• Ensuring the Economic welfare

of the countries.
Discussed the establishment of four
institutions:

1. IMF

2. World Bank (IBRD)

3. ITO and

4. ICU
1) International Monetary Fund (IMF
- for fiscal and monetary issues)

2) World Bank (IBRD – International

Bank for Restructuring and
Development)

3) ITO (International Trade

Organisation - to promote
international trade by eliminating
trade barriers such as Tariffs and
Quotas ).

4)ICU (International Clearing Union-

Regulating BOT with a centralized
common currency account for member
countries – Bancor meaning bank gold in
French language)
• Only IMF and World bank
proposals were accepted.

• ITO and ICU proposals were

not approved.

• Next meeting was held in

Geneva in 1947.

• GATT (General Agreement on

Tariffs and Trade) was
established in January 1948.

• Progressive evolution to
become WTO on 1 January
1995 with 123 member countries.
Objectives of GATT

1. To provide equal opportunities

to all countries in international
market for trading purpose.

2. To increase the effective global

demand.(To encourage foreign trade
i.e., Export and Import)

3. To provide amicable solution to

the disputes related to
international trade.

4. To ensure a better living

standard in the world as a
whole.
Major Guiding Principles
• Non-discrimination

• Reciprocity

• Market access and

• Fair competition
GATT ‘ROUNDS’ OF GLOBAL TRADE
NEGOTIATIONS
The particulars of the various GATT ‘Rounds’
(conferences) for global trade negotiations are
discussed below:

1. First Round

In the first round of talks held in Geneva in

1947, 23 countries, which had formed
GATT, exchanged tariff concessions on
45,000 products worth 10 billion US dollars
of trade per annum.
2. Second Round

Ten more countries had joined GATT when its

second round was held in Annecy (France) in
1949. In this round, customs and tariffs on
5000 additional items of international trade
were reduced.
3. Third Round

The Third round was organized in Torquay

(England) in 1950-51. 38 member countries
of GATT participated in it and they adopted
tariff reduction on 8700 items.
4. Fourth Round

The fourth round of world trade

negotiations were held in Geneva in 1955-
56. In this round 26 countries decided to
further cut duties on goods entering
international trade. The value of
merchandise trade subjected to tariff cut
was estimated at $ 2.5b.
5. Fifth Round

The fifth round took place during 1960-62

at Geneva. In this round the negotiations
covered the approval of common external
tariff (CET) of the European countries and
cut in custom duties amounting to US $ 5
billion on 4400 items. Twenty-six countries
participated in this round.
6. Sixth Round or the Kennedy Round

The US Congress passed the Trade

Expansion Act in October 1962 which
authorised the John Kennedy
administration to make 50 per cent tariff
reduction in all commodities. This paved
the way for the opening of the Kennedy
round of trade negotiations at Geneva in
May 1964, which were to be completed by
30 June 1967.

This round had the participation of 62

countries and negotiated tariff reductions of
approximately $ 40 billion.
 7. Seventh Round or Tokyo Round: -

The Seventh Round of Multilateral Trade

Negotiations (MTN) was launched in
September 1973 in Tokyo.

The Declaration set out a far-reaching

programme for the negotiations in six areas.

• Tariff reduction;
• Elimination of non-tariff barriers;
• Coordinated reduction of all trade barriers in
selected sectors
• Discussion on the multilateral safeguard
system
• Trade liberalisation in the agricultural sector
• Special treatment of tropical products.
 8. Eighth Round or the Uruguay Round

The Uruguay Round started in 1986 in Geneva

and continued for some seven and a half years
and ended at Punta-de-Este, Uruguay in 1994.

On 20 December 1991, Aurthur Dunkel, the

then Director-General of GATT tabled a Draft,
known as the Dunkel Draft.

This was a “take-it-or-leave-it” document which

was hotly discussed.
Main objectives

• to reduce agricultural subsidies

• to begin the process of opening trade in

services like banking and insurance

• to deal with copyright violation and other

forms of intellectual property rights

• to give power to the countries on inflow of

foreign investment
Areas Covered

In the Uruguay Round, the GATT extended to

three new areas, viz. Intellectual property rights,
services and investment.

It also covered agriculture and textiles, which

were outside the GATT jurisdiction.

On 15 December 1993 at the final session,

Chairman Sutherland declared those seven years
of Uruguay Round negotiations had come to an
end.

The negotiation was concluded in April 1994 at

Punta-de-Este, Uruguay. It took seven and a half
years, almost twice the original schedule. By the
end, 123 countries were taking part.
Agreements in Eighth Round

1. An umbrella agreement for establishing the

WTO

2. Agreements for each of the three broad

areas of trade that the WTO covers

o TRIPS

o TRIMS

o GATS

o Agriculture Subsidies

3. Dispute settlement Mechanism

4. Agreement on Customs Valuation and

5.Mechanism for Review of trade policies of

Governments (TPRM)
Finally, on 15 April 1994, 123 Ministers of
member countries approved the results of the
Uruguay Round at Marrakesh (Morocco) and
the GATT disappeared and passed into history
and it was absorbed by the World Trade
Organization (WTO) on 1 January 1995
Results

a. Average cuts of 40% duty on industrial

products.

b. Abolition of all quantitative restrictions

c. Thrust on four points

i)GATS: General Agreement on Trade in

Services (National Treatment for Service Firms)
ii)TRIPs: Agreement on Trade Related
Aspects of Intellectual Property Rights
(Enforce Patents, Copyrights, and Trademarks)
iii)TRIMs: Agreement on Trade Related
Investment Measures. Norms that apply to the
domestic regulations of a country related to
foreign investors.
iv) Agricultural Subsidies

d. Formation of World Trade Organisation.

DIFFERENCES BETWEEN GATT AND WTO

1. The GATT had no legal status

whereas the WTO has a legal status an
organisation.

2. The GATT was a set of rules and

procedures relating to multilateral
agreements of selective nature. Any
member could stay out of the agreement.
In WTO, the agreements are permanent
and binding on all members.

3. The GATT dispute settlement system

was dilatory and not binding on the
parties to the dispute. The WTO dispute
settlement mechanism is faster and
binding on all parties.
4. GATT was a forum where the
member countries met once in a decade
to discuss and solve world trade
problems. World Trade Organization
where decisions on agreement are time
bound.

5. The GATT rules applied to trade in

goods. Trade in services was included
in the Uruguay Round but no agreement
was arrived at. The WTO covers both
trade in goods and trade in services.

6. The GATT had a small secretariat

managed by a Director General. But the
WTO has a large secretariat and a huge
organizational setup.