On October 30, 1947, 23 nations formally ratified the General Agreement on Tariffs and Trade (GATT). It was a binding legal arrangement that reduced or did away with tariffs, subsidies, and quotas while keeping considerable regulations in place. Through rebuilding and liberalizing international trade, the GATT aimed to accelerate post-World War II economic recovery. On January 1st, 1948, the GATT came into being. It has since been improved, finally leading to the World Trade Organization (WTO) being established on January 1, 1995, which absorbed and enlarged it. Its agreements, which at this point encompassed nearly 90% of world trade, had 125 signatories.
General Agreement on Tariffs and Trade: A Brief History (GATT)
From April 1947 through December 1993, the GATT held eight meetings. Significant accomplishments and results were achieved at each conference. Switzerland’s Geneva hosted the first gathering. This opening conference’s main topic was tariffs. The members established tax breaks affecting global trade worth over US$10 billion. In France’s Annecy, the second round of meetings started in April 1949. Once more, the main subject was tariffs. The second meeting included 13 nations, and they managed to reduce tariffs by 5,000 more times through tax concessions. The third round of GATT meetings was place in Torquay, England, beginning in September 1950. This time, 38 nations were involved, and nearly 9,000 tariff concessions were approved, resulting in tax reductions of up to 25%. The committee again decreased global tariffs at its fourth meeting, this time by US$2.5 billion, which was held in Geneva. At this stage, 26 nations have joined. In 1947, when the GATT was initially signed in Geneva, the average tariff rate was almost 22%. By the time of the Uruguay Round, this figure had reduced to approximately 5%. This included negotiation of the foundation of the WTO which was completed in 1993. As the years went by, the nations persisted in tackling world problems.
The Most-favored-nation Rule
Non-discriminatory trade was one of the GATT’s most significant achievements. Every GATT signatory member was expected to treat everyone equally. The WTO has included this idea, known as the most-favored-nation concept. In effect, once a country had agreed to reduce its tariffs with some other nations—typically its biggest trading partners—that reduction would be immediately applied to all GATT signatories. There were escape clauses, which allowed nations to negotiate special circumstances if a tariff drop would particularly affect their domestic producers. When determining tariffs, the majority of countries used the most favorable-nation approach, which mainly supplanted quotas. In rounds of subsequent discussions, tariffs—which are better than quotas but still a trade barrier—were gradually reduced. The most favorable nation rule was introduced by the GATT for member-to-member tariff negotiations.
GATT 1994
The World Trade Organization, founded on 1 January 1995, includes GATT 1994 as a fundamental component. Certain GATT 1947 entities and obligations coexisted with those of the World Trade Organization for a year as part of the transition agreement. The GATT of 1994, which solely addresses trade in products, aspires to further liberalize that trade by lowering tariffs and other trade barriers and banning discrimination. It assembles legal provisions from different sources. It consists of the GATT 1947 provisions and GATT-related legal instruments. It consists of understandings concluded during the Uruguay Round on the interpretation of the provision of the GATT 1947, and of the Marrakesh Protocol of Tariffs Concessions. Although GATT no longer functions as a global organization, the GATT agreement continues to exist. The former title is now “GATT 1947.” The updated version is called “GATT 1994”. Moreover, GATT’s fundamental concepts have been incorporated into the agreements on services and intellectual property. These include non-discrimination, transparency, and predictability.
