General Agreement on Tariffs and Trade (GATT)

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty created in 1947 aimed at promoting international trade by reducing tariffs and other trade barriers. It established a framework for trade negotiations and helped set the rules for global commerce, leading to the formation of the World Trade Organization (WTO) in 1995, which expanded on GATT's principles.

5 Must Know Facts For Your Next Test

1. GATT was created to provide a platform for negotiating trade agreements and reducing trade barriers among member nations after World War II.
2. It played a crucial role in shaping global trade policies by promoting the principles of non-discrimination and reciprocity in trade relations.
3. GATT negotiations led to several rounds, with the Uruguay Round being particularly significant as it resulted in the establishment of the WTO.
4. GATT members committed to gradually reducing tariffs, which facilitated an increase in global trade and contributed to post-war economic recovery.
5. While GATT focused primarily on goods, later agreements under the WTO expanded the scope to include services and intellectual property.

Review Questions

• How did the establishment of GATT contribute to the growth of international trade in the post-World War II era?
  • The establishment of GATT was pivotal for international trade growth as it created a formal framework for countries to negotiate tariff reductions and other trade barriers. By promoting principles like non-discrimination and reciprocity, GATT encouraged nations to engage in trade with one another without fear of arbitrary restrictions. This cooperation among countries led to significant increases in global trade volume, aiding economic recovery in the aftermath of World War II.
• Analyze how GATT laid the groundwork for the formation of the World Trade Organization (WTO) and its broader scope of trade regulations.
  • GATT laid the groundwork for the WTO by establishing key principles that governed international trade and fostering a culture of multilateral negotiations. The Uruguay Round was instrumental as it highlighted the need for a more comprehensive organization that could address issues beyond just goods, including services and intellectual property. The transition from GATT to WTO marked a significant evolution in global trade governance, allowing for more structured dispute resolution and broader participation from member nations.
• Evaluate the impact of GATT's principles on modern globalization and economic interdependence among nations.
  • GATT's principles significantly influenced modern globalization by promoting free trade and reducing barriers that previously hindered economic interactions between nations. This facilitated greater economic interdependence, as countries began to rely on each other for goods, services, and investment. The ongoing legacy of GATT can be seen in current international economic policies, where countries are increasingly engaged in complex supply chains and cooperative agreements, highlighting both the benefits of globalization and the challenges it poses in terms of inequality and trade disputes.

Related terms

World Trade Organization (WTO):

An international organization that emerged from GATT, the WTO provides a framework for negotiating and formalizing trade agreements and resolving trade disputes among member countries.

Tariff: A tax imposed on imported goods, which can affect trade flows by making foreign products more expensive compared to domestic products.

Trade Liberalization: The process of reducing government restrictions on international trade, aimed at promoting free trade and increasing economic efficiency.