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The General Agreement on Trade and Tariffs

World Trade

The WTO's predecessor, the GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the "Bretton Woods" institutions now known as the World Bank and the International Monetary Fund.

Three Basic Principles

Once a tariff concession is agreed to, it cannot be raised MFN, any advantage given to one country must be given to all Imported goods treated the same as domestic goods in terms of regulation and taxes

General Agreement on Tariffs and Trade (GATT) Established in 1947 as a forum to reduce trade barriers

WTO replaced GATT in 1995 as legal and institutional foundation of multilateral trade relations Designed to strengthen the trade rules by providing a stronger set of institutions for resolving disputes and enforcing agreements
Negotiations take place in rounds There have been 9 to date Begins with an agreement among members on agenda Most recent completed round was Uruguay Round Currently on Doha Round

Comparison of Trade Governance Models

Agreement Decision-making bodies New Rules Outlook: Sustainable?


Ministerial Conference General Council and subsidiary bodies (e.g., Dispute Settlement Body) Key Member groupings

Yes, Doha Round should establish new disciplines on subsidies, trade remedies, facilitation, services, RTAs, etc. But, difficult to include new rules on investment, competition, other issues No, except for rules of origin and a few limited areas

Yes, but decisionmaking difficult due to consensus approach Susceptible to being undermined by Doha Round collapse or other problems Perhaps, but limited prospect for deeper reform of rules or the institution Yes, given wide coverage, though limited plans to deepen


Periodic meetings of leaders and ministers Self-implementing, with ad-hoc dispute panels Annual and sectoral review commissions Issue-specific bodies and arbitral/dispute panels


Current rules are very comprehensive (WTO/NAFTA+) and go farther on investment, competition, IPR, etc.

They include the following agreements: Subsidies and countervailing measures - interpreting Articles VI, XVI and XXIII of the General Agreement -Technical barriers to trade - sometimes called the Standards Code -Import licensing procedures -Government procurement -Customs valuation - interpreting Article VII -Anti-dumping- interpreting Article VI and replacing the Kennedy Round Anti-Dumping Code -Bovine Meat Arrangement -International Dairy Arrangement -Trade in Civil Aircraft

GATT has enjoyed a membership of over 100 countries and generated about 85-90% of world trade. (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) (iv) replaced by WTO on January 1, 1995.

GATT 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 XXIV 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.