General Agreement on Tariffs and Trade

Definition

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty established in 1947 aimed at promoting international trade by reducing trade barriers such as tariffs and quotas. GATT laid the groundwork for the World Trade Organization (WTO) and served as a framework for negotiating trade agreements among member countries, fostering a more open and equitable global trading system.

5 Must Know Facts For Your Next Test

1. GATT was originally signed by 23 countries and aimed to create a framework for international trade negotiations.
2. The agreement focused on reducing tariffs and other trade barriers over multiple rounds of negotiations, with the most significant being the Uruguay Round from 1986 to 1994.
3. GATT's principles include non-discrimination, national treatment, and reciprocity, which have influenced global trade policies.
4. The successful conclusion of the Uruguay Round led to the establishment of the WTO, which took over GATT's functions and expanded its scope to include services and intellectual property rights.
5. GATT played a crucial role in post-World War II economic recovery by promoting trade as a means of rebuilding economies and preventing protectionist measures.

Review Questions

• How did the General Agreement on Tariffs and Trade contribute to the globalization of trade?
  • GATT facilitated the globalization of trade by creating a structured environment for international negotiations aimed at reducing trade barriers. By establishing common rules and principles that member countries agreed upon, GATT encouraged nations to engage in trade more freely. This contributed to an increase in global trade flows and interconnectedness among economies, paving the way for the more comprehensive framework provided by the WTO.
• In what ways did GATT's principles impact member countries' trade policies during its operation?
  • GATT's principles had a significant impact on member countries' trade policies by promoting non-discrimination, which meant that countries could not favor their own products over those from other nations. National treatment required countries to treat foreign goods no less favorably than domestic products once they entered the market. Reciprocity encouraged nations to make mutual concessions in negotiations. These principles helped shape more equitable trading practices among member nations.
• Evaluate the legacy of GATT in shaping modern international trade frameworks and its influence on current global economic issues.
  • The legacy of GATT is profound in shaping modern international trade frameworks, as it established foundational rules and negotiation processes that are still relevant today through the WTO. The principles of GATT continue to influence current global economic issues such as trade disputes, tariffs on goods, and discussions surrounding protectionism. The transition from GATT to WTO reflects an evolution in addressing complex global trade dynamics, emphasizing the importance of ongoing dialogue and cooperation among nations in navigating modern challenges like trade wars and economic inequality.

Related terms

World Trade Organization:

An international organization that regulates trade between nations, established in 1995 as a successor to GATT, with a focus on ensuring that trade flows as smoothly, predictably, and freely as possible.

Tariffs: Taxes imposed on imported goods, which can increase the cost of foreign products and serve as a barrier to free trade.

Trade Liberalization: The process of reducing or eliminating trade barriers, such as tariffs and quotas, to encourage free trade and economic cooperation between countries.