General Agreement On Tariffs And Trade (GATT) Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

The General Agreement on Tariffs and Trade (GATT) emerged as a “temporary” intergovernmental organization in 1947. It served as a negotiating forum promoting multilateral trade liberalization. Despite its small secretariat and uncertain status, it promoted significant reductions in tariffs, but it was supplanted in 1995 by the World Trade Organization in response to persistent shortcomings.

Following World War II (1939–1945), the Bretton Woods framers of postwar economic arrangements hoped to create a formal international trade organization (ITO) that would liberalize trade, regulate investment flows and international commodity agreements, and promote development. When negotiation to form an ITO broke down, smaller talks among fifteen leading western trading nations (led by the United States) became the de facto forum for discussion of multilateral trade liberalization. The GATT sprung from these talks. While only twenty-three countries, or “contracting parties,” signed the first round of GATT tariff reductions in 1948, through successive rounds, the treaty expanded to include over 110 countries in the 1990s.

While the GATT was based in Geneva, its principle preoccupation was negotiating tariff reductions through a series of multilateral trade “rounds.” Often these rounds were hosted elsewhere, giving the name to each negotiating round (e.g., the last two rounds were the Tokyo and Uruguay rounds). Each round was guided by a set of GATT principles intended to ensure liberalization; these included the principle of reciprocity, the “most favored nation” provision (which required that members give the same market access to all members that they give to their most favored trading partner), and “national treatment” (which required that states not discriminate against foreign goods). Within these principles, each round focused on binding states to further reductions in existing trade barriers.

Early GATT rounds were undoubtedly successful at achieving tariff reductions. Over the forty-seven year period in which GATT was the key multilateral trade IGO, trade consistently grew at a faster rate than did the size of domestic economies, suggesting that GATT promoted deeper economic integration, which many associate with economic growth. Indeed, most states flocked to join GATT, given its successes.

Prior to the conclusion of the Uruguay Round, however, the GATT appeared increasingly incapable of dealing with the competing agendas of developing and developed countries on politically sensitive issues such as agricultural trade and the expansion of GATT coverage. As tariffs were successfully reduced, negotiators from developed states turned to the removal of more complex forms of trade protectionism. These “nontariff barriers” proved harder to eliminate, because they required deeper coordination of domestic public policies in areas that were politically more sensitive. Demands that the GATT should also include trade in services, investment, and intellectual property only further overstressed its informal structures. Both the Tokyo and Uruguay rounds focused on these types of “post-border paradigm” concerns, and both took much longer to complete than earlier rounds, drawing attention to the shortcomings of the GATT system. Perhaps most problematically, the GATT lacked an effective dispute settlement system, meaning GATT rules were often violated.

Given these problems, the most important outcome of the Uruguay Round was the agreement to supplant the GATT with the more-formally organized World Trade Organization (WTO). The GATT remains the key treaty within the WTO structure, but it has now been joined by treaties covering services, investment, and intellectual property—all under the supervision of the WTO, with its larger permanent secretariat and more effective dispute settlement system.

Bibliography:

Bhagwati, J. The World Trading System at Risk. Princeton: Princeton University Press, 1991.
Finlayson, Jock A., and Mark W. Zacher. “The GATT and the Regulation of Trade Barriers: Regime Dynamics and Functions.” International Organization 35, No. 4 (Autumn 1981): 561–602.
Hoekman, Bernard M., and Michel M. Kostecki. The Political Economy of the World Trading System. 2nd ed. New York: Oxford University Press, 2001.
Jackson, John Howard. The World Trading System: Law and Policy of International Economic Relations. Cambridge, Mass.: MIT Press, 1997.
Winham, Gill R. “GATT and the International Trade Regime.” International Journal 15 (1990): 786–822.

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