GENERAL AGREEMENT ON TARIFFS AND GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)TRADE (GATT)

•Was signed in 1947;

•It is a multilateral trade agreement;

•Regulating trade among about 150 countries;

•According to its preamble, purpose of GATT is “substantial reduction of tariffs and other trade barriers and elimination of preferences, on a reciprocal and mutually advantageous basis”.

• GATT functioned de facto as an organization, conducting eight rounds of talks addressing various trade issues and resolving international trade disputes.

• The Uruguay Round, completed on December 15, 1993 after 7 yrs of negotiations, resulted in an agreement among 117 countries (including U.S.) to reduce trade barriers and to create more comprehensive and enforceable world trade rules.

• The Final Act embodying the results of Uruguay Round, was signed in April 1994.

• This agreement created the World Trade Organization (WTO), which came into being on January 1, 1995.

• GATT was the outcome of the failure of negotiating governments to create the International Trade Organization (ITO).

• The Bretton Woods Conference (1944) had introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II. As governments negotiated the ITO, 23 negotiating states began parallel negotiations for the GATT.

• Once the ITO failed in 1950, only the GATT agreement was left.

Reasons for failure of ITO:• ITO failed mainly because of unwillingness of

the United States to implement the same.• It was contended that ITO is based on the

“unconditional most favored nation principle”. In US, there was large opposition against the ITO (which had already been ratified in several countries), and thus President Truman never even submitted it to the Congress.

However, despite the non-adoption of ITO, US, UK and other developed nations were keen to ensure reduction of trade barriers.

• Thus some of the participants in London Conference on Trade and Employment requested that simultaneously with the continuing discussions of Trade Charter at Geneva, extensive tariff and trade negotiations be started.

• Now since implementation of GATT clauses required parliamentary approval, in some countries GATT could not be implemented.

• To overcome this difficulty a ‘Protocol of Provisional Application’ (PPA) was signed in late 1946 by 26 original members of GATT.

• This Protocol came into effect on January 1, 1948 and GATT was applied through this protocol.

GATT can be divided into three phases:

• the first phase, from 1947 until the Torquay Round, largely concerned with which all commodities would be covered by the agreement and freezing existing tariff levels.

• the second phase, encompassing three rounds, from 1959 to 1979, focused on reducing tariffs.

• the third phase, consisting only of the Uruguay Round from 1986 to 1994, extended the agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of this round the WTO was born.

RoundsRoundsGATT held a total of 8 rounds:• Geneva Round - 1947 :The first round took

place in 1947 in Geneva. 23 countries participated. The main focus of the round was tariff concessions, around 45,000 in total.

• Annecy Round – 1950 :The second round took place in 1949 in Annecy, France. 13 countries participated. The main focus of the talks was more tariff reductions, around 5000 in total.

• Torquay Round – 1951 :The third round occurred in Torquay, England in 1951. 38 countries participated. 8,700 tariff concessions were made.

• Geneva Round - 1955-1956 :The fourth round returned to Geneva in 1955 and lasted until May 1956. 26 countries participated. $2.5 billion in tariffs were eliminated or reduced.

• Dillon Round - 1960-1962 :The fifth round occurred once more in Geneva and lasted from 1960 to 1962. The talks were named after U.S. Treasury Secretary and former Under Secretary of State, Douglas Dillon, who first proposed the talks. 26 countries participated. Along with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of the European Economic Community(EEC).

• Kennedy Round - 1964-1967 :The sixth round was the last to take place in Geneva from 1964 until 1967 and was named after the late US President Kennedy. 66 countries participated. Concessions were made on $40 billion worth of tariffs.

• Tokyo Round - 1973-1979 :Reduced tariffs and established new regulations aimed at controlling the proliferation of non-tariff barriers and voluntary export restrictions. 102 countries participated. Concessions were made on $190 billion worth.

• Uruguay Round - 1986-1993 :The Uruguay Round began in 1986. 125 countries participated. It was the most ambitious round to date, hoping to expand the competence of the GATT to important new areas such as services, capital, intellectual property, textiles, and agriculture.

• The Dunkel Draft Text or Dunkel Package or Dunkel Draft Act embodying the results of Uruguay Round was released on 20th December 1991.

• The Uruguay Round concluded on 15th Dec 1993 and as many as 125 countries including India signed the Final Act on April 15th 1994 at Marrakesh (Morocco).

• Thus, the General Agreement on Tariffs and Trade (GATT) also known as the Dunkel Agreement, finally emerged as the World Trade Organization (WTO) in 1995.

Why GATT converted to WTO?

• GATT rules discriminated against developing countries under the garb of clauses such as “escape clauses”, “safeguard rules”, “voluntary export restraints”, “orderly agreements”.

• ‘Agriculture’ was treated as a special case thus escaping GATT rules.

• Though developed countries removed majority of tariff barriers yet some others still remained affecting the interests of developing countries.

• US and EEC had concluded several bilateral, discriminatory and restrictive arrangements outside GATT rules.

• “Safeguards” rules under GATT undermined the effective working of GATT.

• Customs union and free trade areas permitted under GATT had been distorted and abused.

• Though GATT was a mandatory body, it lacked enforcing mechanism.

• Last but not the least, with the emergence of more and more new developing countries, it was felt that GATT rules devised half a century ago had outlined their utility.

THANK YOU !!

By:- Navneet KaurLLM Batch 2009-11

NALSAR University of Law,Justice City, R.R. Dist.,

Shameerpet,Hyderabad-500078 (A.P) India.