GATT and WTO

The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. GATT and WTO According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." The GATT was first discussed during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO). GATT and WTO It was signed by 23 nations in Geneva on October 30th, 1947, and was applied on a provisional basis January 1st, 1948. It remained in effect until January 1st, 1995, when the World Trade Organization (WTO) was established after agreement by 123 nations in Marrakesh on April 15th, 1994, as part of the Uruguay Round Agreements. The WTO is the successor to the GATT, and the original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. GATT and WTO Nations that were not party in 1995 to the GATT need to meet the minimum conditions spelled out in specific documents before they can accede; in September 2019, the list contained 36 nations.

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GATT and WTO During the 1930s, the amount of bilateral negotiation under this act was fairly limited, and in truth it did not do much to expand global or domestic trade. However, the Second World War led policy makers to experiment on a broader level. In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations. GATT and WTO These mechanisms were called the General Agreement on Tariffs and Trade (GATT) and the ITO (International Trade Organization). GATT and WTO GATT was simply a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations. It was built on the Reciprocal Trade Agreements Act, which allowed the executive branch to negotiate trade agreements, with temporary authority from the Congress.

The ITO

The ITO, in contrast, set up a code of world trade principles and a formal international institution. The ITO’s architects were greatly influenced by John Maynard Keynes, the British economist. The ITO represented an internationalization of the view that governments could play a positive role in encouraging international economic growth. GATT and WTO It was incredibly comprehensive: including chapters on commercial policy, investment, employment and even business practices (what we call antitrust or competition policies today). The ITO also included a secretariat with the power to arbitrate trade disputes. But the ITO was not popular. It also took a long time to negotiate. Its final charter was signed by 54 nations at the UN Conference on Trade and Employment in Havana in March 1948, but this was too late. The ITO missed the flurry of support for internationalism that accompanied the end of WWII and which led to the establishment of agencies such as the UN, the IMF and the World Bank. The US Congress never brought membership in the ITO to a vote, and when the president announced that he would not seek ratification of the Havana Charter, the ITO effectively died. Consequently the provisional GATT (which was not a formal international organization) governed world trade until 1994 (Aaronson, 1996, 3-5).

GATT

GATT was a club, albeit a club that was increasingly popular. But GATT was not a treaty. The United States (and other nations) joined GATT under its Protocol of Provisional Application. This meant that the provisions of GATT were binding only insofar as they are not inconsistent with a nation’s existing legislation. With this clause, the United States could spur trade liberalization or contravene the rules of GATT when politically or economically necessary (US Tariff Commission, 1950, 19-21, 20 note 4).

From 1948 until 1993, GATT’s purview and membership grew dramatically. During this period, GATT sponsored eight trade rounds where member nations, called contracting parties, agreed to mutually reduce trade barriers. But trade liberalization under the GATT came with costs to some Americans. Important industries in the United States such as textiles, television, steel and footwear suffered from foreign competition and some workers lost jobs. However, most Americans benefited from this growth in world trade; as consumers they got a cheaper and more diverse supply of goods, as producers, most found new markets and growing employment. From 1948 to about 1980 this economic growth came at little cost to the American economy as a whole or to American democracy (Aaronson, 1996, 133-134).

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