General Agreements on Tariff & Trade (GATT)
 

[B]General Agreement on Tariffs and Trade (typically abbreviated GATT) [/B]


functioned as the precursor to the World Trade Organization trading system. GATT was created by the Bretton Woods meetings that took place in Bretton Woods, New Hampshire, in 1944, setting out a plan for economic recovery after World War II, by encouraging reduction in tariffs and other international trade barriers. Twenty-three nations signed the agreement. This first version of GATT is referred to as "GATT 1947". In 1994, GATT was updated with new obligations upon its signatories. One of the most significant changes made in GATT (or "GATT 1994") was the creation of the World Trade Organization (WTO). 75 of the GATT members and the European Communities are the founding members of WTO on 1.1.1995. Other 52 of the GATT members rejoined WTO in the next 2 years (the last is Congo in 1997). After the WTO founding 21 new (non-GATT) members have joined and 28 are currently negotiating their membership. Of the former GATT members only SFR Yugoslavia has not rejoined (and it's already impossible). Since FR Yugoslavia (renamed to Serbia and Montenegro and with membership negotiations later split in two) is not recognized as direct SFRY successor state its application is considered a new one, non-GATT.


The GATT, as an international agreement, is very similar to a treaty. Under United States law it is classed as a congressional-executive agreement. It is based on the "unconditional most favored nation principle." This means that the conditions applied to the most favored trading nation (i.e. the one with the least restrictions) apply to all trading nations.


Historical Roots of GATT and the Failure of the ITO
While the United States has always participated in international trade, it did not take a leadership role in global trade policy making until the Great Depression. One reason for this is that under the US Constitution, Congress has responsibility for promoting and regulating commerce, while the executive branch has responsibility for foreign policy. Thus, trade policy was a tug of war between the branches and the two branches did not always agree on the mix of trade promotion and protection. However, in 1934, the United States began an experiment, the Reciprocal Trade Agreements Act of 1934. In the hopes of expanding employment, Congress agreed to permit the executive branch to negotiate bilateral trade agreements. (Bilateral agreements are those between two parties -- for example, the US and another country.)

During the 1930s, the amount of bilateral negotiation under this act was fairly limited, and in truth it did not do much to expand global or domestic trade. However, the Second World War led policy makers to experiment on a broader level. In the 1940s, working with the British government, the United States developed two innovations to expand and govern trade among nations. These mechanisms were called the General Agreement on Tariffs and Trade (GATT) and the ITO (International Trade Organization). GATT was simply a temporary multilateral agreement designed to provide a framework of rules and a forum to negotiate trade barrier reductions among nations. It was built on the Reciprocal Trade Agreements Act, which allowed the executive branch to negotiate trade agreements, with temporary authority from the Congress. This was a reason whay the trade system was good.

[B]"Rounds" of GATT trade negotiations[/B]


The countries who signed GATT occasionally negotiated new trade agreements that all would enter into. Each such set of agreements was called a "round". In general, each of these agreements bound the members to reduce certain tariffs, with many special-case treatments of individual products, and in many cases with exceptions and modifications for each country.

1. Geneva Round (1948): 23 countries. GATT enters into force.

2. Annecy Round (1949): 13 countries.

3. Torquay Round (1951): 38 countries.

4. Fourth Round - Geneva (1956): 26 countries. Tariff reductions.
Strategy set for future GATT policy toward developing countries, improving their positions as treaty participants.

5. Dillon Round (1962): 26 countries. Tariff reductions. Named after C. Douglas Dillon, then U.S. Undersecretary of State.

6. Kennedy Round (1967): 62 countries. Tariff reductions. This was an across-the-board reduction rather than a product-by-product specification, for the first time. Anti-dumping agreement (which, in the United States, was rejected by Congress).

7. Tokyo Round (1979): 102 countries. Reduced non-tariff trade barriers. Also reduced tariffs on manufactured goods. Improvement and extension of GATT system.

8. Uruguay Round (1986): 125 countries. Created the World Trade Organization to replace the GATT treaty. Reduced tariffs and export subsidies, reduced other import limits and quotas over the next 20 years, agreement to enforce patents, trademarks, and copyrights (TRIPS), extending international trade law to the service sector (GATS) and open up foreign investment. It also made major changes in the dispute settlement mechanism of GATT.



Source:investopedia