What Is the General Agreement on Tariffs and Trade (GATT)?
Let me explain what GATT is directly: the General Agreement on Tariffs and Trade, signed in 1947 by 23 countries, serves as a treaty to minimize barriers in international trade by cutting quotas, tariffs, and subsidies. I see it as a critical step to aid economic recovery after World War II. Over time, GATT grew and was refined, culminating in the 1995 creation of the World Trade Organization (WTO), which took over its functions. By that point, 125 nations had signed on, covering about 90% of global trade.
Today, the Council for Trade in Goods—often called the Goods Council—handles GATT matters, with representatives from all WTO members. Ambassador Clare Kelly of New Zealand chairs it, and the council includes 10 committees dealing with issues like market access, agriculture, subsidies, and anti-dumping measures.
Key Takeaways
- GATT was signed by 23 countries in October 1947 and became effective on January 1, 1948.
- Its main purpose was to simplify international trade.
- It aimed to remove harmful trade practices from the prewar era.
- GATT conducted eight rounds of trade talks from April 1947 to December 1993, each yielding notable results.
- In 1995, the WTO absorbed GATT and expanded its scope.
Understanding How GATT Works
You should know that GATT was designed to end or limit the worst aspects of the prewar protectionist era, such as quantitative barriers like trade controls and quotas. It set up a system for resolving commercial disputes between nations and supported multilateral talks to lower tariff barriers. In the postwar period, GATT proved highly successful in these efforts.
One core achievement was ensuring trade without discrimination—every signatory treated others equally under the most-favored-nation principle, which carried over to the WTO. Practically, this meant that a tariff cut negotiated with key partners applied to all GATT members automatically. While escape clauses allowed exceptions to protect domestic industries, most nations used this principle for tariffs, shifting away from quotas. Tariffs themselves were steadily reduced through negotiation rounds.
The History of GATT
GATT's history spans eight rounds of meetings from April 1947 to December 1993, each with key outcomes. The first, in Geneva with 23 countries, focused on tariffs and secured concessions affecting over $10 billion in global trade. The 1949 Annecy round involved 13 countries and added 5,000 more tariff reductions.
By the 1950 Torquay round, 38 countries participated, passing nearly 9,000 concessions that cut taxes by up to 25%. Japan joined in 1956 during the fourth Geneva round, where 26 countries reduced tariffs by $2.5 billion. These efforts continued, introducing anti-dumping measures in 1964 and the Multifibre Arrangement for textiles in the 1970s. The Uruguay Round from 1986 to 1993 created the WTO and addressed agriculture and intellectual property.
Overall, tariffs dropped from about 22% in 1947 to 5% by the Uruguay Round's end. Member countries tackled broader issues, and the ongoing Doha Development Round since 2001 aims to help developing nations with lower barriers.
Frequently Asked Questions About GATT
What was GATT's purpose? It sought to dismantle protectionist policies that blocked trade before and during World War II, reducing tariffs and quotas to foster mutual trade and postwar stability.
Is GATT a free trade agreement? Yes, it promoted free trade by minimizing barriers and ensuring fair practices among nations.
Why did the WTO replace GATT? GATT lacked a strong institutional setup; the WTO builds on its principles with better tools for issues like intellectual property and faster dispute resolution.
The Bottom Line
Without GATT, the world would look quite different today. Its push for free trade ended a era of protectionism and hardship that contributed to World War II, enabling decades of growth and globalization.
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