General Agreement on Tariffs and Trade GATT

In making the assessment of gains from the Tokyo Round, Salvatore remarked, “It has been estimated that the total static gains from trade liberalization under the Tokyo Round amounted to about $ 1.7 billion annually. With the dynamic gains arising from the economies of scale and greater all-round efficiency and innovations, the figure might rise to as high as $ 8 billion per year”. In case of all other Articles, the amendments required a two-thirds majority. The decision about the admission of new members too required a two-thirds majority.

On the other hand, there was no doubt that the extension of the Long-Term Arrangement Regarding International Trade in Cotton Textiles, which later became the Multi-Fiber Arrangement, for three years until 1970 led to the longer-term impairment of export opportunities for developing countries. The main focus of the talks was more tariff reductions, around 5,000 in total. Some of the negative aspects of the proposals will get diluted subsequently when the provisions of the agreement are implemented.

  1. Another was the internal crisis of 1965, which ended in the Luxembourg Compromise.
  2. Preparations for the new round were immediately overshadowed by the Chicken War, an early sign of the impact variable levies under the Common Agricultural Policy would eventually have.
  3. All of these agreements emanate from specific provisions of GATT 1947, but they did not abrogate those GATT provisions.
  4. It was, therefore, necessary to review the dispute settlement system of the GATT and to make it more effective and expeditious.
  5. If the matter has still not been resolved, the contracting party can refer it to the CONTRACTING PARTIES.

The GATT also condemned the practice of dumping (selling products abroad for less than they are sold domestically). Anti-dumping duties could be applied to countries that engaged in these practices if material injury to domestic industry occurred or was
threatened; or if a domestic industry could not be established because of them. GATT rules required that any member country give all members the same privileges regarding tariffs and other commercial policy measures that it gave to the most favoured nation (MFN) with which it negotiated. The way in which disputes were dealt with under GATT evolved from a ruling from the chair on a dispute, to establishing a working party to consider the matter and advise the CONTRACTING PARTIES, to a more formal system which would involve a three-person “panel”.

The most notable achievement was agreement on a Memorandum of Agreement on Basic Elements for the Negotiation of a World Grants Arrangement, which eventually was rolled into a new International Grains Arrangement. Another was the internal crisis general agreement on tariffs and trade of 1965, which ended in the Luxembourg Compromise. Preparations for the new round were immediately overshadowed by the Chicken War, an early sign of the impact variable levies under the Common Agricultural Policy would eventually have.

I: General Most-Favoured-Nation Treatment

The issue of farm subsidies by European Union (EU) had brought the Uruguay negotiations almost on the verge of collapse in 1992. Even in December 1993 agreement, there was the provision only of some scaling down of the export subsidies on farm products. The developed countries oppose trade liberalisation vehemently where it even slightly hurts their exports. However, in the spheres in which they have trade advantages, they remain indifferent to the needs and problems of the less developed countries. If the developed countries succeed in their machinations, it will amount to the nullification of multilateralism of the GATT and WTO and acceptance of unilateralism and economic authoritarianism of the developed countries. The recognition of special problems of less developed countries concerning trade, tariff and payments led to the appointment of committee of experts that submitted its report in 1958.

GATT and the World Trade Organization

In the view of many developing countries, this was a direct result of the call at UNCTAD I for a better trade deal for them. The Article XIX of the WTO incorporated safeguards and escape clauses. It authorised the contracting parties to adopt protective measures in case of need such as severe balance of payments problems and prevention of the flow of subsidised imports or in the event of dumping. Though these clauses were supposed to be temporary measures but in practice had become almost permanent feature of the international trading system. The relative importance of trade in services has considerably increased in the postwar period. In the latter half of 1980’s, the trade in services accounted for more than 50 percent of the value- added in industrial countries and constituted over 20 percent of international trade.

Finally the member countries could hammer out an international agreement by the stipulated deadline. This treaty was signed on October 30, 1947 and became effective on 1st January 1948. This treaty is known as the General Agreement on Tariffs and Trade (GATT). Since 1947, there have been eight rounds of negotiations among the member countries of the GATT for the promotion of free trade. The Uruguay Round of GATT negotiations culminated in the creation of World Trade Organisation (WTO) which came into existence on January 1, 1995.

The trade chiefs

GATT dispute settlement reports and practice pre-dating the WTO as regards the provisions of the GATT 1947 is summarised in the GATT Analytical Index, the predecessor to the WTO Analytical Index. The diversities existing among them created difficult problems in framing and implementing uniform general rules of conduct concerning trade, tariffs and payments. Although GATT attempted to extend preferential or special treatment to the less developed countries, yet the escape clause and safeguard rules of the GATT amounted to the denial of trade benefits to them. The major hurdle for the developing countries in obtaining trade concessions was on account of the principle of reciprocity. The developing countries were unable to provide equivalent tax concessions to the developed countries.

(See also Globalization.)
Regular trade negotiations were conducted and refined among member states on a regular basis. Eight multilateral trade conferences (called rounds) were held between 1947 and 1994. (See also International Trade.)
The GATT was established at the first round in 1947. Subsequent rounds were held in Annecy, France (1949), and Torquay, England (1951).

Basic Instruments and Selected Documents (BISD) (K4602 .B36 and on HeinOnline). It contains the text of GATT agreements and amendments, Protocol of Provisional Application and Annexes and other legal instruments (such as decisions, declarations, resolutions, and other selected documents ). The WTO considers the documents in BISD to have the legal standing of the originals. Documents Online on the WTO website provide links to WTO legal texts and official documents (including texts of the WTO agreements) as well as to documents issued under the GATT.

This report stressed upon the reduction of tariffs and taxation on industrial and primary products of the less developed countries. Prior to the Kennedy Round ( ), there was little gain for less developed countries from the GATT except that they were allowed to use some measure of quantitative trade restrictions to adjust the BOP deficits. The tariff reduction by the developed countries also brought, to a limited extent, some benefit for them. The rules of GATT, apart from making provision for reduction of trade barriers and enlargement of world trade, called for consultation with other contracting parties to waive trade obligations, to provide for settlement of trade disputes, and even to permit retaliatory action. Despite its institutional deficiencies, the GATT managed to function as a de facto international organization, sponsoring eight rounds of multilateral trade negotiations.

Agriculture was essentially exempted from previous agreements as it was given special status in the areas of import quotas and export subsidies, with only mild caveats. However, by the time of the Uruguay round, many countries considered the exception of agriculture to be sufficiently glaring that they refused to sign a new deal without some movement on agricultural products. These fourteen countries came to be known as the “Cairns Group”, and included mostly small and medium-sized agricultural exporters such as Australia, Brazil, Canada, Indonesia, and New Zealand.

Other major sources of friction for international trade such as quotas, dumping, and subsidies are very limited under GATT, reducing the ability of countries to be singled out by another country. The WTO is working to produce a digital archive with all official documents issued under the GATT; more than half of the documents are available on the WTO website. GATT Documents (called WTO Documents after 1994) (Microforms Room) is a microfiche set containing documents from 1984 to 1996 de-restricted by GATT.

It provided for automatic grant of approval of the application on the inflow of goods, simplification of licensing procedure in case of quota and other import restrictions. It also provided for creating institutions and procedures for consultation and settlement of disputes between the contracting parties. The Sixth GATT Conference ( ), known as the Kennedy Round, was held at Geneva. The results of Kennedy Round included the tariff reduction by the advanced countries like the U.S.A, the EEC countries, Japan and Canada on an average to the extent of 35 percent. By that time 10 more countries had joined the GATT raising the number of contracting parties to 33. In this round of trade negotiations 147 sets of bilateral negotiations converting about 500 items were completed.

The United States and its allies in Western Europe thought of creating conditions for liberal trade after the War. Prior to GATT, trade barriers had been raised during the Great Depression with many countries having tariffs of over 40% during the 1930s. In order to counterbalance the harmful effects of these tariffs and rebuild economies after World War II, many nations participated in discussions to lower many barriers to trade. The result of the first rounds of discussions was the GATT which successfully lowered many barriers to trade. While meant as a multilateral treaty, GATT effectively became its own organization for managing trade issues among members due to the failed International Trade Organization (ITO).

Of the original GATT members, Syria,[20][21] Lebanon[22] and the SFR Yugoslavia have not rejoined the WTO. Since FR Yugoslavia (renamed as Serbia and Montenegro and with membership negotiations later split in two), is not recognised as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to establish a working party to examine the request of Syria for WTO membership.[23][24] The contracting parties who founded the WTO ended official agreement of the “GATT 1947” terms on 31 December 1995. Montenegro became a member in 2012, while Serbia is in the decision stage of the negotiations and is expected to become a member of the WTO in the future.

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