GATT

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty established in 1947 aimed at promoting international trade by reducing tariffs and other trade barriers. It played a crucial role in the post-World War II economic landscape, encouraging countries to engage in trade liberalization and paving the way for the establishment of the World Trade Organization (WTO) in 1995.

5 Must Know Facts For Your Next Test

1. GATT was created to provide a forum for negotiating trade agreements and addressing issues related to international trade, which became increasingly important after the devastation of World War II.
2. Over its existence, GATT went through several negotiation rounds, including the Tokyo Round (1973-1979) and the Uruguay Round (1986-1994), each leading to significant trade agreements and reforms.
3. GATT's primary focus was on reducing tariffs, but it also addressed non-tariff barriers to trade, such as subsidies and import quotas.
4. The transition from GATT to the WTO marked a significant shift, as the WTO expanded the scope of trade agreements to include services, intellectual property, and investment, reflecting the evolving nature of global trade.
5. GATT's principles continue to influence international trade negotiations and agreements today, serving as a foundational element for many countries' trade policies.

Review Questions

• How did GATT contribute to the reduction of trade barriers among member countries?
  • GATT facilitated negotiations between member countries aimed at reducing tariffs and other trade barriers. By establishing a platform for discussions, GATT encouraged nations to commit to lowering their tariffs and eliminating non-tariff barriers. This collaborative approach helped create a more open trading environment, fostering economic cooperation and increasing global trade volume.
• In what ways did the Uruguay Round of negotiations lead to significant changes in international trade regulations under GATT?
  • The Uruguay Round resulted in major reforms that transformed GATT from a simple agreement focused primarily on tariffs into a more comprehensive framework addressing various aspects of international trade. It led to the establishment of the World Trade Organization (WTO), which expanded the scope of trade negotiations to include services, intellectual property rights, and agricultural subsidies. These changes marked a shift towards a more structured system of global trade governance.
• Evaluate the impact of GATT on contemporary global trade policies and its legacy in shaping modern trade agreements.
  • GATT has had a lasting impact on contemporary global trade policies by establishing foundational principles such as nondiscrimination and transparency in international commerce. Its legacy is evident in modern trade agreements that continue to follow GATT's framework for reducing barriers and promoting fair competition. The transition to the WTO further built on GATT’s achievements by addressing new challenges in global trade, ensuring that its principles remain relevant in today's interconnected economy.

Related terms

WTO: The World Trade Organization is an international body that regulates and facilitates international trade, succeeding GATT and providing a framework for negotiating trade agreements and resolving trade disputes.

Trade Liberalization: The process of reducing government restrictions, such as tariffs and quotas, on international trade to encourage free trade among nations.

Most-Favored-Nation Clause: A principle within GATT that ensures any trade advantage granted by one member country to another must be extended to all other GATT members, promoting non-discriminatory trade practices.