General Agreement on Tariffs

and Trade
• The General Agreement on Tariffs and Trade
(GATT) was first signed in 1947.

• Was designed
– To provide an international forum
– That encouraged free trade between
member states
– By regulating and reducing tariffs on traded
goods
– Providing a common mechanism for
resolving trade disputes.
 GATT ???
A Treaty, not an Organization

• Was the outcome of the failure of negotiating

governments to create the ITO
• The Bretton Woods Conference introduced the idea for
an organization to regulate trade as part of a larger plan
for economic recovery after World War II
• As governments negotiated the ITO, 15 negotiating
states began parallel negotiations for the GATT as a way
to attain early tariff reductions
• Once the ITO failed in 1950, only the GATT agreement
was left.
Objective
“Reduction of
• The GATT's main objective was the
Barriers to International Trade”

• This was achieved through the Reduction of

– Tariff barriers
– Quantitative Restrictions
– Subsidies on trade through a series of agreements
History
• 3 Phases

– First Phase , from 1947 until the Torquay Round

– A second phase, encompassing three rounds, from

1959 to 1979

– The Third phase, consisting only of the Uruguay

Round from 1986 to 1994
 First Phase
• Commodities which would be covered by the
agreement and freezing existing tariff levels

Year Place/name Subjects covered

1947 Geneva Tariffs

1949 Annecy Tariffs

1951 Torquay Tariffs

Second Phase
• Focused on reducing tariffs

Year Place/name Subjects covered

1960-1961 Geneva Tariffs

Dillon Round

1964-1967 Geneva Tariffs and anti-dumping

Kennedy measures
Round

1973-1979 Geneva Tariffs, non-tariff

Tokyo Round measures, “framework”
agreements
Third Phase
Extended the agreement fully to new areas such as
intellectual property, services, capital, and agriculture.
Out of this round the WTO was born.

Year Place/name Subjects covered

1986-1994 Geneva Tariffs, non-tariff

Uruguay Round measures, rules,
services, intellectual
property, dispute
settlement, textiles,
agriculture, creation of
WTO, etc
 ROUNDS

NAME START DURAT COUNTR SUB. ACHIVEMENTS

ION IES COVERED
1.GENEVA APRIL 7 23 TARIFFS SIGNING OF GATT,
MONTHS 45,000 TARIFF
1947 CONCESSIONS
AFFECTING $10
BILLION OF TRADE.

2. ANNECY APRIL 5 13 TARIFFS COUNTRIES

EXCHANGED SOME
1949 MONTHS
5000 TARIFF
CONCESSIONS.
 ROUNDS CONT…

NAME START DURATIO COUNT SUB. ACHEVEMENTS

N RIES COVERED
3. SEPT. 1950 8 MONTHS 38 TARIFFS COUNTRIES
TORQUAY EXCHANGED SOME
8700 TARIFF
CONCESSIONS,
CUTTING THE
TARIFFS BY 25%

4. GENEVA JAN. 1956 5 MONTHS 26 TARIFFS, $2.5 BILLION IN

II ADMISSION TARIFF REDUCTION
OF JAPAN

5. DILLON SEPT. 1960 11 MONTHS 26 TARIFFS TARIFF CONCESSION

WORTH $4.9
BILLION OF WORLD
TRADE.
 ROUNDS CONT…

NAME START DURATION COUNTR SUB. ACHIVEMENTS

IES COVERED
6. MAY 1964 37 MONTHS 62 TARIFFS & TARIFF CONCESSION
KENNEDY ANTIDUMPING WORTH $40 BILLION OF
WORLD TRADE

7. TOKYO SEPT. 74 MONTHS 102 TARIFF, NON TARIFF REDUCTION

1973 TARIFF WORTH $190 BILLION
MEASURES, ACHIEVED.
“FRAMEWORK”

AGREEMENTS

8. SEPT. 87 MONTHS 123 TARIFFS,NON CREATION OF WTO, &

URUGUAY 1986 TARIFFS,RULES, EXTENDED THE RANGE OF

SERVICES,IP,DI TRADE
SPUTE NEGOTIATION,LEADING TO

SETTLEMENT,TE THE REDUCTION IN

XTILES,AGRI. TARIFFS(ABOUT 40%).
Did GATT succeed?
 Continual reductions in tariffs helped spur
very high rates of world trade growth during
the 1950s and 1960s — around 8% a year on
average

 Trade growth consistently out-paced

production growth

 The rush of new members during the

Uruguay Round demonstrated recognition of
multilateral trading system as the anchor for
development and an instrument of economic
and trade reform.
But…….
• GATT’s success in reducing tariffs to a low level, with a
series of economic recessions 1970-80’s drove
governments to devise other forms of protection for
sectors facing increased foreign competition

• High rates of unemployment and constant factory

closures led governments in Western Europe and North
America to seek bilateral market-sharing arrangements
with competitors and to embark on a subsidies race to
maintain their holds on agricultural trade

• Both these changes undermined GATT’s credibility and

effectiveness.
• The problem was not just a deteriorating trade policy
environment.
By the early 1980s the General Agreement was clearly
no longer as relevant to the realities of world trade as it
had been in the 1940s

• World trade had become far more complex and

important than 40 years before
• The globalization of the world economy was underway
• Trade in services — not covered by GATT rules

• Ever increasing international investments

• Factors convinced GATT members that a new effort to
reinforce and extend the multilateral system should be
attempted.

That effort resulted in the Uruguay Round, the Marrakesh

Declaration, and the creation of the WTO.
Thank You