General Agreement on Tariffs and Trade

Definition

The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement that establishes rules for international trade. It aims to promote free trade by reducing or eliminating tariffs, quotas, and other barriers to trade between participating countries, ultimately leading to increased economic growth and development globally, regionally, and nationally.

5 Must Know Facts For Your Next Test

1. GATT was established in 1947 and was the precursor to the World Trade Organization (WTO), which was created in 1995.
2. The primary goal of GATT is to promote global economic growth and development by reducing trade barriers and establishing rules-based international trade.
3. GATT has facilitated multiple rounds of trade negotiations, leading to the gradual reduction of tariffs and other trade barriers among member countries.
4. GATT principles include most-favored-nation treatment, national treatment, and reciprocity, which aim to create a level playing field for international trade.
5. The WTO, which replaced GATT, has a broader mandate that includes trade in services, intellectual property rights, and dispute settlement mechanisms.

Review Questions

• Explain how the General Agreement on Tariffs and Trade (GATT) aims to promote free trade globally.
  • The General Agreement on Tariffs and Trade (GATT) aims to promote free trade globally by establishing rules and principles that reduce or eliminate trade barriers, such as tariffs and quotas, between participating countries. By lowering these barriers, GATT seeks to facilitate the unrestricted flow of goods and services, leading to increased economic growth and development. The key principles of GATT, including most-favored-nation treatment and national treatment, create a more level playing field for international trade, ultimately benefiting consumers and producers alike.
• Describe the role of GATT in shaping trade policy at the regional level.
  • At the regional level, the General Agreement on Tariffs and Trade (GATT) has played a significant role in influencing trade policies among countries within a specific geographic area. GATT's principles and rules have often served as a foundation for the formation of regional trade agreements, such as the European Union and the North American Free Trade Agreement (NAFTA). These regional arrangements build upon the GATT framework, further reducing trade barriers and promoting economic integration within their respective regions. The GATT-inspired regional trade policies have the potential to foster greater economic cooperation, increased market access, and more efficient utilization of resources among the participating countries.
• Analyze how the transition from GATT to the World Trade Organization (WTO) has impacted national trade policies and regulations.
  • The transition from the General Agreement on Tariffs and Trade (GATT) to the World Trade Organization (WTO) has had a significant impact on national trade policies and regulations. The WTO, which was established in 1995, has a broader mandate than GATT, covering not only trade in goods but also trade in services, intellectual property rights, and dispute settlement mechanisms. This expanded scope has required countries to align their national trade policies and regulations more closely with WTO rules and agreements. The WTO's dispute settlement system has also provided a more robust framework for resolving trade disputes between member countries, influencing the way national governments approach and enforce their trade policies. Furthermore, the WTO's principles, such as non-discrimination and transparency, have prompted countries to review and modify their domestic trade regulations to ensure compliance with international standards, ultimately shaping national trade policies in a more globally integrated context.

Related terms

Tariffs: A tax imposed on imported goods, designed to raise the price of those goods in the domestic market, making domestic products more competitive.

Quotas: Limits on the quantity or value of goods that can be imported, often used to protect domestic industries from foreign competition.

Free Trade: An economic policy that removes or reduces trade barriers, such as tariffs and quotas, to allow for the unrestricted flow of goods and services between countries.