GATT into WTO 1995

Q: How GATT started??

A: The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It was negotiated during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it was replaced by the World Trade Organization

 in 1995.

GATT eight Rounds…

The first round of GATT took place in 1947 in Geneva and ended in 1948. Although the talks failed to create the ITO they did produce the GATT agreements that 23 out of the 45 Allies signed. 45,000 tariff concessions were made influencing over $10 billion in trade which comprised 20% of the total global market at the time. The US specifically developed the "unconditional most favored nation principle." Congress granted the President temporary and provisional power over the GATT negotiations and all nations trading with the USA would be bound by the same rules as the nation with the least restrictions. The US senate blocked the approval of the ITO out of fear that it may have been misused to regulate cartels in Europe.

The second round took place in 1949 in Annecy, France. The main focus of the talks was more tariff reductions, around 5000 total.

The third round occurred in Torquay, England in 1951. About 8,700 tariff concessions were made totaling the remaining amount of tariffs to three-fourths of the tariffs which were in effect in 1948.

The fourth round returned to Geneva in 1955 and lasted until May 1956. $2.5 billion in tariffs were eliminated or reduced.

The fifth round occurred once more in Geneva and lasted from 1960 to 1962. The talks were named after Under Secretary of State General of the US, Douglas Dillon, who first proposed the talks. Along with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of the European Economic Community (ECC).

The sixth round was the last to take place in Geneva from 1964 until 1967 and was named after the late US President Kennedy in his memory. Concessions were made on $40 billion worth of tariffs. Some of the GATT negotiation rules were also more clearly defined.

The seventh round of GATT took place in Tokyo from 1973 until 1979. The talks managed to reduce several trade barriers in addition to $300 billion in tariffs. Negotiations covered a range of topics including government procurement, customs valuation, subsidies, countervailing measures, antidumping, standards and import licensing.

The eighth round of GATT took place in Punta del Este, Uruguay from 1986-1993. The round covered many aspects of services, capital and agriculture and also led to large concessions in agricultural subsidies, augmented the level of trade negotiations opening up new foreign markets for investments, led to an allowance of full access for textiles and clothing from LDC's, and extended certain intellectual property rights such as trademarks and patents. Fourteen nations, now known as the Cairns group, refused to sign the agreements after blatant refusal by the other countries to cover key agricultural topics such as European and US farm subsidies increases and the double standard by which GATT demanded liberalized economies and the US and many other countries continued means of agricultural protection practiced since the 1950's.

After the concluding rounds of GATT had come to an end, the GATT trade ministers met in Morocco to form the World Trade Organization. The WTO provided a permanent institutional structure for the agreements of GATT to be codified. The WTO discussions are designed to follow five principles:

A trading system should be free of discrimination in the sense that one country cannot privilege a particular trading partner above others within the system, nor can it discriminate against foreign products and services.

A trading system should tend toward more freedom, that is, toward fewer trade barriers (tariffs and non-tariff barriers).

A trading system should be predictable, with foreign companies and governments reassured that trade barriers will not be raised arbitrarily and that markets will remain open.

A trading system should tend toward greater competition.

A trading system should be more accommodating for less developed countries, giving them more time to adjust, greater flexibility, and more privileges.

All agreements made by members of the WTO must be passed by consensus of all 150 members as to find the most agreeable terms for all member nations. New members must also sign and ratify all WTO agreements upon gaining membership. Although trade sanctions are a common means of punishing states who fail to comply with WTO mandates, they are only effective against weaker states. Technically, US cotton subsidies have been declared illegal by the WTO, but the US continues to ignore the ruling.

The WTO has received much criticism for certain trade agreements. Despite the supposed goals of the WTO which are designed to help the poorer developing nations, many WTO laws unfairly benefit already developed nations and propagate dependencia. Developed countries continue to use farm subsidies to control agricultural goods, while developing nations are generally prevented from doing the same (which could be very helpful in their development). Developed nations may also employ high import duties while enforcing trade barriers on developing nations. Many of the developed nations did not have the means to participate in the Uruguay round properly or meet the conditions which the agreements required simply because of their impoverished status. During the Uruguay round, many technologies were patented internationally which developing nations could no longer afford to purchase legally such as medicines and machinery. The majority of patent royalties are paid directly to companies in developed nations and create artificial scarcity of items that would be otherwise readily available at a much lower price. For these reasons and more, protests and even riots have been commonplace in the WTO and GATT's history.

Why GaTT into WTO?????????????

AAA::::   While the GATT functioned well enough, the leading members wished to replace it with a world-wide trade-regulating body like the WTO for a number of reasons. First, the GATT rules applied to trade only in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property (through the agreement on Trade-related Aspects of Intellectual Property Rights—TRIPs). Second, while GATT was a multilateral instrument, by the 1980s many new agreements of a plurilateral, and therefore selective nature had been added. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership. Third, The WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system.

But beyond these practical and functional reasons for establishing the WTO, there were also more philosophical and symbolic reasons. The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. By contrast, the WTO is a permanent institution with its own secretariat. Moreover, the GATT was applied on a "provisional basis" even if, after more than forty years, governments chose to treat it as a permanent commitment while the WTO commitments are fully and functionally permanent.

Agenda of GATT????

AAA:   The General Agreement on Tariffs and Trade (GATT) is the Geneva-based organization that sets international tariff and trade rules. It has been called "the economic teeth of the new world order." Scant information is available and little attention is paid to the workings of GATT, yet its impact, particularly in agriculture, labor and the environment, is widespread and profound. Negotiations, currently stalled, are to resume soon. Herbert Gunther lays out the hidden agenda behind GATT and its enormous global implications.