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GATT AND WTO

GATT(GENERAL AGREEMENT
ON TARIFFS AND TRADE)
 BEGAN IN 1947 WITH 23 MEMBERS.
 Location: Geneva

 Purpose: “Substantial reduction of tariffs and


other trade barriers and elimination of
preferences, on reciprocal and mutually
advantageous basis”.
The role of GATT
 GATT sponsored rounds
 GATT as monitor
 Most Favorable Nation Clause(MFN)
 Lack of legal status
Principles of GATT
 Trade without Discrimination
 Protection only through tariff
 Stable basis of trade
 consultation
Objectives of GATT
 To provide equal opportunities to all countries in
international market for trading.
 To increase the effective demand for real income
growth and goods.
 To minimize tariffs on trade for ensuring mutual
benefit.
 To provide proper solution to the disputes related
to international trade.
 To ensure a better living standards in the world as
a whole.
Early rounds of GATT
 8Rounds:
 Beginning : Geneva :1947
 Annecy(France):1949
 Torquay (UK):1950
 Geneva :1956
 Dillon:1960
 Kennedy:1964
 Tokya :1973
 Uruguay:1986
Drawbacks of GATT
 No enforcement authority
 Problems in formulation of General rules
 Less benefits for the LDC’s
 Quantitative Trade Restrictions.
WTO(World Trade Organization)

 Headquarters: Geneva, Switzerland


 Purpose: Regulate international trade
 Founded: 1 January 1995
 Membership: 164 member states
 Formation: 1 January 1995;
 The current Director-General is Roberto Azevêdo of Brazil,
WTO(World Trade Organization)

 The World Trade Organization (WTO) is


an intergovernmental organization that
regulates international trade.
Objectives
 to set and enforce rules for international trade,
 to provide a forum for negotiating and monitoring
further trade liberalization,
 to resolve trade disputes
 to increase the transparency of decision-making
processes.
 to cooperate with other major international
economic institutions involved in global economic
management.
 to help developing countries benefit fully from the
global trading system.
Functions
 Helping developing and transition economies.
 Specialized help for export
THE RELEVANCE OF WTO
• The system helps promote peace.
• The system allows disputes to be handled constructively.
• A system based on rules rather than power makes life easier
for all.
• Freer trade cuts the cost of living.
• It gives consumers more choice and a broader range of
qualities to choose from.
• Trade raises incomes.
• Trade stimulates economic growth and that can be good
news for employment
• The basic principles make the system economically more
efficient, and they cut costs.
THE RELEVANCE OF WTO
 Developing Countries How the WTO deals with the
special needs of an increasingly important group.
 In the agreements: more time, better terms
 Legal assistance: a Secretariat service.
 WTO technical cooperation
 Participation in the system: opportunities and
concerns

 • Least-developed countries: special focus


 • Committees -Trade and Development Committee
Importance
Difference between GATT &
WTO
Difference between GATT &
WTO
BASIS FOR
COMPARISON GATT WTO
 The rules of GATT are only  The rules of WTO includes
Scope for trade in goods. services and aspects of
intellectual property along
with the goods.

Contracting parties.  Members.


Participant 

TRIPS AND  Not given much emphasis.  Special emphasis.


TRIMS

 No permanent structure  Permanent structure


Structure
Trade block
 Group of countries
 Existence within a geographical region.
 Motive is to protect themselves from the imports of
non-members
 A form of economic integration increasingly
shaping the pattern of world trade.
Trade block
Objectives of Trading Blocs:

i. To remove trade restrictions among member


nations.
ii. To improve social, political, economic and cultural
relations among member nations.
iii. To encourage free transfer of resources.
iv. To establish collective bargaining.
v. To promote economic growth.
TYPES OF TRADING BLOCS
 Major Types of Trading Blocs:-
1.Preferential Trade Area (PTA’s)
2.Free Trade Area
3.Customs Union
4.Common Market
TYPES OF TRADING BLOCS
Major Regional Trade Blocks
 European Union(EU)
 North American Free Trade Agreement(NAFTA)
 South Asian Association for Regional
Cooperation(SAARC)
 South Asian Free Trade Area(SAFTA)
 Association of South-East Asian Nations(ASEAN)
Positive aspects/REASONS FOR JOINING
UNIONS

 Greater Bargaining Power


European Union(EU)

 The world’s largest trading bloc.


 The 2nd largest economy in the world.
 Originally called the “Economic Community”.
(Common Market or The Six)
 Formed from the ‘Treaty of Rome’ in 1957.
 It comprised of 6 members- Germany, France,
Italy, Belgium, Netherlands and Luxemburg. At
present it comprises of 27 member states.
North American Free Trade
Agreement(NAFTA)
 Initially bilateral trade between Canada & U.S.
 NAFTA went into effect in January 1,1994 after the
joining of Mexico, creating a trilateral trade bloc in
North America.
 World’s largest free trade area.
 NAFTA has two supplements: the North American
Agreement on Environmental Cooperation (NAAEC)
and the North American Agreement on Labour
Cooperation (NAALC).
Association of Southeast Asian
Nations (ASEAN)
 Formed 8th August,1967 (Indonesia, Malaysia,
Philippians, Singapore & Thailand)
 Later joined by Brunei, Burma, Cambodia, Laos &
Vietnam Established ASEAN Free Trade Area
(AFTA)
 Headquarter- Jakarta, Indonesia
South Asian Association for
Regional Cooperation (SAARC)
 Established on 8th December 1985
 Member Countries- Bangladesh, Bhutan, India,
Maldives, Nepal, Pakistan & Sri Lanka
 Headquarter- Kathmandu, Nepal
South Asian Free Area(SAFTA)

 The council of ministers have signed the SAARC


preferential trading arrangement agreement on
April 11, 1993.
 Objectives:-
 To gradually liberalize the trade among members
of SAARC
 To eliminate trade barriers among SAARC countries
& reduce or eliminate tariffs To promote and
sustain mutual trade & economic cooperation
among member countries
Association of South-East Asian
Nations(ASEAN)