GATT

Historical Evolution of the GATT 1947

• Bretton Woods Conference at the end of the WWII, finance ministers

from the Allied nations gathered to discuss creation of a new monetary
system that would support postwar reconstruction, economic stability,
and peace.
IBRD(international bank for reconstruction and development) & IMF
(international monetary fund)
need for a third institution, ITO(international trade organization
• 1940s: Representatives met to design a postwar trading system that
would parallel the international monetary system.
Draft a Charter for ITO,
Negotiate the substance of an ITO agreement (rules governing governing
international trade and reductions in tariffs.

• 1947: 23 Members
• Today: 153 Members
 Objectives of GATT
• Primary objective of GATT1947 is to expand
international trade by liberating trade to bring all
round economic prosperity.
• Main objectives:
i. Raising standard of living
ii. Ensuring full employment and large and steady
growing volume of real income and effective demand
iii. Better utilization of the resources of the world
iv. Expansion of production and international trade.
Convention and main principles of the GATT

• The rule of convention of GATT requires that:

i. Any proposed change in the tariff, or other type
of commercial policy of a member country,
should not be undertaken without consultation
with the other parties to the agreement .
ii. The countries that adhere to GATT should work
towards the reduction of tariffs and other
barriers to international trade, which should be
negotiated within the frame work of GATT.
Convention and main principles of the GATT

• Gatt 1947 contains the following four

fundamental principles:
i. Non discrimination
ii. Prohibition of quantitative restriction
iii. Consultations
iv. Negotiations
 Fundamentals of GATT

• MFN Status
• National Treatment
• Protection through tariff
• Dispute settlement
 GATT Trade Rounds
Year Place / Name Subjects Covered Countries
1947 Geneva Tariffs 23
1949 Annecy Tariffs 13
1951 Torquay Tariffs 38
1956 Geneva Tariffs 26
1960 – 1961 Dillon Round Tariffs 26
1964 – 1967 Kennedy Round Tariffs and Anti-Dumping 62
Measures
1973 – 1979 Tokyo Round Tariffs, Non-tariff 102
Measures, Framework
Agreements

1986 – 1994 Uruguay Round Tariffs, Non-tariff 123

Measures, Rules, Services,
Intellectual Property,
Dispute Settlement,
Textiles, Agriculture,
Creation of WTO
 GATT negotiation rounds

1. The Geneva round,1947-

• This round was part of establishment of
GATT, held between 10th April to 30th
October,1947.
• 23 countries participated.
• 45000 tariff concessions agreed covering
USA$10 billion in trade.
• Commitment to future negotiations Rounds.
 GATT negotiation rounds

2. The Annecy Round,1949-

• The primary purpose of calling this round was
to extend GATT to those countries which
could not be part of the Geneva sessions.
• Nine new members joined bringing GATT
membership to 32.
• Contracting parties exchange some 5000
tariff concessions.
 GATT negotiation rounds

3. The Torguay Round, 1950-51. –

• European countries with low tariffs levels felt
the Torguay negotiations were
disadvantageous to them.
• Out of 400 agreements , 147 were settled.
• Number of participants were 34. 8,700 tariff
concessions agreed leading to an overall tariff
reduction of approximately 25% in relation to
the 1947/48 level.
 GATT negotiation rounds
4. The Geneva Round, 1955-56. –
• In this round several countries withdrew from negotiations due to inadequate
scope for tariff reduction.
• Single schedule of concessions agreed for the European Economic Community.
• European countries went back disappointed.
• The number fell down to 22 .
• Focused on product by product method in accordance with “principal supplier
rule” which meant that principle supplier of a particular product was expected to
entertain the possibility of offering concession only on a product for which
another country that was also major supplier of that product had requested
concession. Negotiations were held by and amongst principal supplier. Once
concessions on a product had been agreed upon a principle of mutually
advantageous basis between the principal suppliers, the deal would become
multilateral as the MFN obligations in Article of GATT would apply.
• Geneva round had limited access yet the liberalization of trade in agricultural
sector and the need of less developing countries were recognized in a report
known as Haberler Report (1958). Following which 3 committees were
established:
1. Committee 1 focused on agenda for the next round.
2. Committee 2 reviewed the domestic agricultural policies of each contracting
party
3. Committee 3 addressed to the economic needs of the less developing
countries(LDCs) in the world trading system.
 GATT negotiation rounds
5. The Dillon Round(Geneva), 1960-62. –
• 45 countries were party to this fifth round
• This round was negotiated in the background of the
threat of EEC’s common external tariff which to some
countries meant trade distortion.
• The EEC tariff for the purpose of GATT, Article XXIV: 6
amounted to large scale external tariff negotiations by
the EEC to compensate individual contracting parties for
any imbalance that would result when the EEC replaced
the variegated tariffs of each EEC member with a single
external tariff.
• EEC’s Common Agricultural Policy was also considered
as threat and committee 3 had already drawn attention
to this trade distorting agricultural policy.
• This round provided for opportunity for discussing the
threats to international trade and without much fuss EEC
was integrated into the GATT.
 GATT negotiation rounds
6. The Kennedy Round,1964-67. –
• 48 countries took part .
• 11 industrialized countries decided on giving a 50 % reduction offer in
industrial tariffs .
• Some 35 developing countries participated under special procedures.
• Four additional countries negotiated for accession to GATT.
• Negotiation expanded from a product –by-product approach to linear
method or across the board method.
• This round saw some product by product and sector by sector tariff
negotiations.
• Linear method would have presupposed that all countries reduce
tariffs by prescribed percentage on all items . Certain countries
decided that they would not participated on a linear basis and were
permitted to practice on product by product basis.
• Linear approach was abandoned so far as agricultural goods were
concerned
• Separate agreement concluded on grains and chemical product.
• Establishment of a code on anti dumping.
 GATT negotiation rounds

7. The Tokyo Round,1973-79. -

• 99 countries of different levels of development
and economics system including many non GATT
members took part .
• It was the most comprehensive of all the earlier
GATT sessions on multilateral trade.
• Average tariffs on manufactured goods in the
world’s nine major industrial market reduced
from 7% to 4.7%.
• Agreement reached on technical barriers to trade
; subsidies and countervailing measures ; import
licensing procedure ; government procurement ;
customs valuation ; trade in bovine meat, dairy
products ; civil aircraft ; and a revised anti
dumping code.
 GATT negotiation rounds
• To combat non tariff measures the following major agreements were reached at the
negotiations in the Tokyo round:
1. Agreement on technical barriers to trade
2. Agreement on government procurement
3. Agreement on interpretation and application of Articles VI, XVI and
XXIII(countervailing duties and subsidies)
4. Agreement regarding Bovine Meat
5. International Dairy Agreement
6. Agreement on implementation of Article VII(custom Valuation)
7. Agreement on import licensing procedures
8. Agreement on trade in civil aircraft
9. Agreement on Article VI(antidumping)
10.Framework agreements relating to:
I. Differential and more favorable treatment , reciprocity and fuller participation
of developing countries
II. Declaration on trade measures taken for a balance of payments purposes
III. Safeguards action for development purposes
IV. Understanding regarding notification, consultation, dispute settlement and
surveillance.
 The Uruguay Round Sep1986-Dec1993
• Worsening trade environment led to the need for ministerial level
conference trade practices being held within GATT.
• 28th Jan 1987 trade ministers launched the GATT round at Punta de Este,
Uruguay.
• April 12-15,1994 ministers met at Marrakesh, Morocco to ratify the results
of Uruguay Round.
• WTO came into existence on January 1, 1995 with GATT remaining an
integral part the WTO Agreements.
• Talks were going to extend the trading system into several new areas,
notably trade in services and intellectual property, and to reform trade in
the sensitive sectors of agriculture and textiles; all the original GATT
articles were up for review.
• The round was supposed to end in December 1990, but the US
and EU disagreed on how to reform agricultural trade and decided to
extend the talks.
• In November 1992, the US and EU settled most of their differences in a
deal known informally as "the Blair House accord", and on April 15, 1994,
the deal was signed by ministers from most of the 123 participating
governments at a meeting in Marrakesh, Morocco
 Achievements

• The GATT still exists as the WTO's umbrella treaty for trade in
goods, updated as a result of the Uruguay Round negotiations
(a distinction is made between GATT 1994, the updated parts of
GATT, and GATT 1947, the original agreement which is still the
heart of GATT 1994)
• The GATT 1994 is not, however, the only legally binding
agreement included in the Final Act; a long list of about 60
agreements, annexes, decisions and understandings was
adopted. In fact, the agreements fall into a simple structure
with six main parts:
 an umbrella agreement (the Agreement Establishing the WTO);
 goods and investment (the Multilateral Agreements on Trade in
Goods including the GATT 1994 and the Trade Related
Investment Measures(TRIMS));
 services (General Agreement on Trade in Services(GATS));
 intellectual property (Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS));
 dispute settlement (DSU);
 reviews of governments' trade policies (TPRM)
 Achievements
• The agreements for the two largest areas under the WTO,
goods and services, share a three-part outline:
 broad principles (such as the General Agreement on Tariffs
and Trade and General Agreement on Trade in Services);
 extra agreements and annexes;
 lengthy schedules (lists) of commitments made by
individual countries.
• One of the achievements of the Uruguay round would be
the Uruguay Round Agreement on Agriculture,
administered by the WTO, which brings agricultural trade
more fully under the GATT
• The agreement also imposes rules and disciplines on
agricultural export subsidies, domestic subsidies, and
sanitary and phytosanitary (SPS) measures through
the Agreement on the Application of Sanitary and
Phytosanitary Measures