GATT

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement aimed at promoting international trade by reducing tariffs and other trade barriers. Established in 1947, it played a crucial role in the post-World War II economic planning and international agreements, fostering economic cooperation among member nations. GATT set the framework for global trade negotiations and was a precursor to the World Trade Organization (WTO).

5 Must Know Facts For Your Next Test

1. GATT was signed by 23 countries in 1947 and served as a framework for negotiating trade rules until the establishment of the WTO in 1995.
2. The agreement focused on tariff reductions but also addressed non-tariff barriers to trade, aiming for fair competition among member countries.
3. Over the years, GATT negotiations led to several rounds of talks, most notably the Uruguay Round, which resulted in significant trade liberalization.
4. GATT’s principles emphasized reciprocity, transparency, and the most-favored-nation treatment, which required member countries to treat all trading partners equally.
5. The transition from GATT to WTO represented a shift towards a more structured organization with a broader mandate, including services and intellectual property rights.

Review Questions

• How did GATT contribute to post-war economic recovery and international cooperation?
  • GATT played a significant role in post-war economic recovery by facilitating international trade through tariff reductions and the elimination of trade barriers. By promoting a system of rules and agreements among nations, GATT fostered cooperation and stability in a world still reeling from the effects of World War II. This helped rebuild economies by encouraging countries to engage in commerce rather than protectionism.
• What were some key achievements of GATT during its existence, particularly regarding tariff reductions?
  • During its existence, GATT achieved significant tariff reductions through multiple negotiation rounds, greatly lowering average tariffs across member countries. One notable achievement was the Uruguay Round, where member nations committed to extensive reductions in tariffs and addressed non-tariff barriers, leading to greater market access for many products. This contributed to a substantial increase in global trade volume and established a foundation for future trade agreements.
• Evaluate the impact of GATT's principles on the formation of modern global trade policies and organizations.
  • GATT's principles had a lasting impact on modern global trade policies by establishing foundational concepts such as most-favored-nation treatment and national treatment. These principles encouraged equitable trading practices that became integral to the structure of the World Trade Organization (WTO), which succeeded GATT. The WTO expanded upon GATT's framework, incorporating services and intellectual property into trade discussions, reflecting the evolution of global commerce and the increasing complexity of international economic interactions.

Related terms

WTO: The World Trade Organization (WTO) is an international organization that regulates trade between nations, succeeding GATT and aiming to ensure that trade flows as smoothly, predictably, and freely as possible.

Tariffs: Tariffs are taxes imposed on imported goods and services, used by governments to restrict trade and protect domestic industries.

Multilateral Trade Agreements: These are trade agreements involving three or more countries aimed at reducing trade barriers and facilitating economic cooperation among the participating nations.