GATT

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty aimed at promoting international trade by reducing trade barriers such as tariffs and quotas. Established in 1947, GATT was the first major international agreement to promote free trade and establish a framework for negotiating trade rules among its member countries, which significantly impacted global economic policies.

5 Must Know Facts For Your Next Test

1. GATT originally had 23 signatory countries and aimed to create a global trading system based on fairness and reciprocity.
2. The agreement facilitated eight rounds of negotiations, leading to significant tariff reductions on numerous goods, thus boosting global trade volume.
3. One of the key principles of GATT was 'most-favored-nation' treatment, which required member countries to extend the same trading advantages to all GATT members.
4. GATT was not a formal international organization; it operated as a set of rules that governed international trade until the establishment of the WTO.
5. The Uruguay Round, which concluded in 1994, was the last round of negotiations under GATT and led to the creation of the WTO, expanding the scope of trade rules beyond just goods to include services and intellectual property.

Review Questions

• How did GATT influence global trade patterns after its establishment?
  • GATT significantly influenced global trade patterns by promoting free trade principles and reducing tariffs and other trade barriers. This led to an increase in international commerce as countries engaged more freely with each other, ultimately fostering economic interdependence. The reduction of tariffs encouraged member countries to expand their exports and imports, reshaping economic relationships worldwide.
• Discuss the key principles of GATT and their implications for international trade agreements.
  • GATT was founded on several key principles, including most-favored-nation treatment, national treatment, and transparency. Most-favored-nation treatment required that any favorable trading terms offered by one member to another be extended to all members. National treatment mandated that imported goods should be treated equally to domestic products once they entered a country. These principles helped create a level playing field in international trade and encouraged countries to engage in negotiations that reduced barriers.
• Evaluate the role of GATT in shaping modern international trade policy and its transition to the WTO.
  • GATT played a crucial role in shaping modern international trade policy by laying the groundwork for cooperation among nations to reduce tariffs and other barriers. Its principles influenced subsequent agreements and fostered an environment conducive to trade liberalization. The transition from GATT to the WTO marked a significant evolution in global trade governance, allowing for more comprehensive regulations covering not only goods but also services and intellectual property rights. This transition reflects a growing recognition of the complexities of global commerce and the need for a robust institutional framework to address them.

Related terms

WTO: The World Trade Organization (WTO) is an international organization that succeeded GATT in 1995, providing a more comprehensive framework for negotiating trade agreements and resolving trade disputes among its members.

Tariffs: Tariffs are taxes imposed by governments on imported goods, which can increase the cost of foreign products and protect domestic industries from foreign competition.

Trade Liberalization: Trade liberalization refers to the reduction or elimination of trade barriers, such as tariffs and quotas, to encourage free trade between countries and stimulate economic growth.