Chapter 1

LECTURE 1.3 Objectives of GATT

Introduction

 The General Agreement on Tariffs and Trade (GATT) is considered as

multilateral agreement regulating international trade.
 The General Agreement on Tariffs and Trade (GATT) was signed on Oct.
30, 1947, by 23 countries, was a legal agreement for minimizing the barriers
to international trade by eliminating or reducing quotas, tariffs, and subsidies
while preserving significant regulations.
 The GATT was intended to boost economic recovery after World War II
through reconstructing and liberalizing global trade.
 Under GATT, member nations meet at regular intervals to negotiate
agreements to reduce quotas, tariffs, and such other restrictions and barriers
on international trade. GATT, by its nature, is a contractual agreement
among parties (or the nations).
 It is a treaty that is collectively administered by the contracting nations.
 However, it has become a permanent international organization for
safeguarding the conduct of international trade and an institution for the
multilateral expansion of trade.

Objectives of GATT:
The General Agreement on Tariffs and Trade (GATT) was created after
World War II to aid global economic recovery through reconstructing and
liberalizing global trade. GATT's main objective was to reduce barriers to
international trade through the reduction of tariffs, quotas and subsidies. By
reducing tariff barriers and eliminating discrimination in international trade, the
GATT aims at:
1. Expansion of international trade,
2. Increase of world production by ensuring full employment in the participating
nations,
3. Development and full utilization of world resources, and
4. Raising standard of living of the world community as a whole.
However, the articles of the GATT do not provide directives for attaining
these objectives. These are to be indirectly achieved by the GATT through the
promotion of free (unrestricted) and multilateral international trade.

The rules which are adopted by GATT are based on the following fundamental
principles are as follows:
1. Trade should be conducted in a non-discriminatory way;

2. The use of quantitative restrictions should be condemned; and

3. Disagreements should be resolved through consultations.

Most Favored Nations Clause:

The members of GATT agree that reduction in tariffs and elimination of
discrimination in international commerce should be on a reciprocal and mutually
advantageous basis.

To ensure Non-discrimination, members agree to grant to each other unconditional

most favored nation status in all import and export duties, with certain exceptions.
Article I of the Agreement deals with the ‘most favored nation clause which means
that any advantage, favor, privilege or immunity granted by a contracting party to
any product originating in or designed for any other country shall be accorded
immediately and unconditionally to a like product originating in or destined for the
territories of all other contacting parties.

Tariff Negotiations:
GATT recognizes that tariffs are the main impediments to the growth of
international trade. Thus, the contracting parties are authorized to negotiate for a
substantial reduction of tariffs occasionally.
GATT and WTO
GATT lives on the foundation of the WTO. The 1947 agreement itself is
considered defunct. But, its provisions were incorporated into the GATT in the
year 1994 agreement. That was designed to keep the trade agreements going while
the WTO was being set up. So, the GATT 1994 is itself a component of the WTO
Agreement.