Read this essay to learn about the General Agreement on Tariffs and Trade (GATT). After reading this essay you will learn about:- 1. Introduction to GATT 2. The Havana Charter-1948 3. General Agreement on Trade and Tariffs (GATT) 4. Meaning of GATT 5. Structure of GATT 6. Membership of GATT 7. GATT Conferences Held Since 1947 8. The Tokyo Round 9. The Uruguay Round and Other Details.
List of Essays on the General Agreements on Tariffs and Trade (GATT)
Essay Contents:
- Essay on the Introduction to GATT
- Essay on the Havana Charter-1948
- Essay on the General Agreement on Trade and Tariffs (GATT)
- Essay on the Meaning of GATT
- Essay on the Structure of GATT
- Essay on the GATT Conferences held since 1947
- Essay on the Tokyo Round
- Essay on the Uruguay Round
- Essay on the Activities of GATT
- Essay on the Emergence of World Trade Organization
- Essay on the Beginning of the Continuity despite Shortcomings
1. Essay on the Introduction to GATT:
To fight and conquer is just our nature and this we had been doing either to gain economic benefits or to retain them. But the devastation caused by the past two world wars had changed our perception of dominance.
The intellectual development had taught us to use more refined ways to gain the economic dominance; these refined ways are the use of technology and commerce. The military might is a standby arrangement to ward off any misadventure by others.
We have learnt a lesson from the last war that mutual cooperation is the only key to survival in this growing complex world and the economic soundness is the only solution to all the problems.
So countries big or small now try to find ways and means for better economic position that brings them closer to each other increasing the interaction and mutual cooperation, these are the conditions conducive for trade and development. The confrontation has given way to cooperation. The countries of the world now depend heavily on trade for their economic well- being and this has made each one dependent on others.
As said earlier in this book that international trade is nothing but the collective sum of the imports and the exports, so what is one’s import is another’s export and the need to regulate this flow of goods and services had been on our minds for a long time and especially since the early thirties when the world leaders started pondering on the idea of forming a common platform for the conduct of international trade.
The war time allies in the year 1944 provided the first move in this direction.
2. Essay on the Havana Charter-1948:
The World War II brought the countries closer together and for the first time they started to think seriously to find ways and means of preventing the use of the restricted trade practices which were considered to be the root cause of conflicts amongst the nations and for the first time a serious thought was given to forming a world body to regulate the flow of the world trade.
The UN forum provided a common platform for the nations of the world to formulate common code of conduct for the international trade.
Thus three UN agencies were contemplated to be formed:
1. International Monetary Fund (IMF).
2. International Bank for Reconstruction and Development (IBRD).
3. International Trade Organization (ITO).
Both IMF and IBRD were established in the year 1944 at Bretton Woods Conference. The formation 164 International Business and Contract Management of ITO was delayed due to the involvement of various conflicting interests of the member nations.
The UN Economic and Social Council took up the matters at its first session in February 1946 and appointed a 17-member committee to formulate a draft of the charter for the ITO. This charter was prepared and submitted to 56 nation conference that met in Havana on 21st November 1947 and after making some 800 amendments finally was signed on 24th March 1948 by 48 countries.
This charter since then has been known as the Havana charter. The signatory countries included India, Pakistan, USA, UK, Sweden, Australia, France, Canada etc. Only three countries (Argentina, Poland and Turkey) did not sign and 8 abstained amongst which were USSR, Hungary and Yugoslavia.
The purpose of the charter was to promote the international trade by establishing a common code of fair conduct that would avoid the economic conflicts amongst the member nations.
The main objectives of this charter were:
To create environments for increasing the production, consumption and exchange of goods amongst the member nations for a balanced and expanding world trade.
To assist in the industrial and economic development especially of the developing countries by increasing the flow of capital needed for the productive investment.
To encourage the member countries to reduce the tariff barriers, quota systems, export subsidies and direct and/or indirect cartel formations.
To encourage and create investment climate.
To formulate trade dispute settlement mechanism.
To encourage and sustain economic development of all countries on equal terms and to open up access to markets, products and production facilities needed for the overall prosperity and development.
The Havana Charter even though good in intentions but could not take off because of the opposition by its most powerful member country—the USA.
The main reason behind US objection to this charter was not that it did not approve of it but because of the then general economic situation in USA and because many within the US government felt that the charter contained too many escape clauses to be positively effective instrument and also because they considered this charter as being too strong and if implemented would hamper the private investment.
So in December 1950 the US President Truman took the decision for not submitting the Havana Charter to the US Senate for ratification with the result the Havana Charter could not get majority support at the UN and thus failed to come into force.
But nevertheless it gave direction to world leaders and also laid the foundation of another UN body, all in line within the main objective, this new body was later called the General Agreement on Trade and Tariffs (GATT).
3. Essay on the General Agreement on Trade and Tariffs (GATT):
The foundation of GATT was laid when the 17 member nations while preparing the draft charter for the ITO (Havana Charter) agreed to work together for lowering the customs tariffs and identifying and reducing the other trade barriers in order to promote the expansion of trade amongst themselves.
The first tariff negotiation conference under the new direction was held in Geneva in 1947. The special concessions agreed upon by each other during this conference were included in a general agreement called the General Agreement on Trade and Tariffs or in brief GATT. The GATT agreement was signed on 30th October 1947 and came into force on 1st January 1948.
The establishment of GATT was thought to be makeshift arrangement till the time ITO comes into force. But as the time progressed GATT took up all the functions of the intended Havana Charter.
4. Essay on the Meaning of GATT:
GATT was not an organization, it was a treaty amongst the countries to become contracting parties for mutual economic welfare and for the conduct of free and fair trade practices. It was a multilateral trade agreement highlighting the mutual rights and obligations of the member countries for the conduct of international trade.
It gave the world the required common code of conduct for fair and free trading practices aimed at promotion of economic development, generation of employment, better living standards. It assisted the member countries to accord to each other the Most Favoured Nation treatment (MNF).
The countries signing this treaty mutually agreed to avoid confrontation and promote consultations to resolve disputes and trade barriers. This sense of working together had been a significant achievement since the member countries represented the bulk of the then world trade.
5. Essay on the Structure of GATT:
GATT was administered by a secretariat of about 350 people under the Director General.
Headquarter is located at:
Center William Rappard
154-Rue De Langanne
Ch-1211 Geneva-21. Switzerland
The member countries provided its budget. The individual contributions were assessed according to that country’s share in the total trade of the contracting parties and associated governments. The individual country’s share was calculated by taking the average foreign trade figures for the last available three years.
The minimum contributions was 0.12 % for those countries whose trade value was 0.12 % or less as compared to the total trade value of the contracting parties. In 1980 the contributions were 39,830,000 Swiss francs and in 1987 the budget was $ 42 million.
The apex decision making body is the ministerial conference meeting at least once in two years. Then there was the General Council to oversee the operational side of the agreements and the apex body’s decisions and policy directives, it was a central forum in which the member countries act collectively in sessions held once in a year in Geneva.
In between the annual sessions the council of representatives established in 1960 largely carried out the routine and any urgent work of the GATT.
This council could not take any decisions requiring the use of the voting rights of the member countries, if the session was not on then the council adopted the postal ballot criteria for getting the consent of the members for arriving at a decision, and/or it submitted its recommendations to members by postal ballot to get their consents for making a decision.
The council could also set up committees, working groups or expert’s panels for assistance. All violations of GATT provisions were reported to this council. In 1975 council set up a consultative group of 18 high level representatives nominated by member country’s government to provide a balanced representation, this group also maintained coordination with IMF.
All disputes within the scope of GATT were referred to the special panels and the Dispute Settlement Body (DSB) which had the authority of the General councils and the relevant committees of the related agreement(s).
6. Essay on the Membership of GATT:
GATT was a treaty signed between different government of the nations, thus the nations were the member countries and not any individual. Nation when become a member, it was termed as the contracting party.
On 1st January 1948 when this treaty came into force it was applied by only 8 governments but the membership grew to 95 contracting parties and 29 additional countries which maintained a de facto application of GATT pending final decision.
Any independent sovereign country could apply for membership of GATT all such countries had to adhere to provisions of GATT as their obligation towards this treaty and must offer to the existing members what they will get from the existing members. The proposed terms of the new entrant were submitted to vote and had to be approved by two-third of all GATT members.
The developing countries were given special treatment under the provisions of GATT. Amongst the signatory countries of GATT as of 31st December 1994 2/3rd were developing countries and their economic growth was well protected under GATT.
They took full part in the activities of GATT and the Tokyo round gave priority for the promotion of the trading activities of these countries as a matter of conscious and purposeful effort on the part of GATT. In 1965 a new chapter No. IV was added in the general agreement to cover the interests of the developing countries.
This chapter outlined the framework of the undertaking that the developed countries would not expect the developing countries to make contributions inconsistent with their individual development, financial and trading needs.
Tokyo round also set up two new sub-committees, one was to examine any new protective measures taken by the developed countries against imports from the developing countries, and the second sub-committee was to consider the trade problems of the least developed countries.
In 1964 GATT established an International Trade Center (ITC) to provide trade information and trade promotion advisory service for the developing countries.
This centre assisted the developing countries in formulating and implementing their export promotion programmes, it provided information and advice on export markets and marketing techniques besides providing training in these activities to the personnel from the developing countries.
7. Essay on the GATT Conferences held since 1947:
Since its inception many trade negotiation conferences had been held and the tariff and non-tariff concessions that had been agreed, had given tremendous boost to world trade and had been instrumental in the general well-being of the economies of contracting countries.
The general agreement of GATT tried to reduce the trade tariffs and barriers and matters relating to such activities were guided by this agreement that provided the necessary mechanism for the multilateral tariff negotiations. The main purpose of such negotiations was that all the contracting parties must aim for according to all others the MFN status on reciprocal basis.
The various trade negotiation conferences that took place since the inception of GATT are as follows:
1947: The Geneva round in Switzerland
1948: Formation of 1TO by the International Conference on Trade and Employment in Havana
1949: Annecy: multilateral tariff negotiations 2nd round in France
1951: Torquay: multilateral tariff negotiations 3rd round in England
1956: Geneva: multilateral tariff negotiations 4th round in Switzerland
1957: Rome treaty: formation of European Common Market.
1960-61: Geneva: multilateral tariff negotiations 5th round termed as DILLON round in Switzerland under GATT
1964-67: Geneva: multilateral tariff negotiations 6th round, termed as Kennedy round in Switzerland.
1967: ASEAN formed
Role of WB, WTO and ICC in Promotion and Development of Global Trade 167
1973-79: Tokyo: multilateral tariff negotiations 7th round in Tokyo Japan and Geneva Switzerland, termed as Tokyo round under GATT
1979: GATT declaration on trade measures for balance of payment
1983: GATT secretariat established
1986-92: Punta Del Este: multilateral tariff negotiations 8th round in round in Uruguay termed as Uruguay round
1989: GATT introduced Trade Policy Review Mechanism (TPRM)
1990: In April 99 Canada trade minister Mr. John Crosbie proposed for the creation of World Trade Organization “WTO”
1992: Maastricht: Treaty signed in February 1992
1994: NAFTA became operational on 1st January 1994
1994: Based on the Uruguay round, on 15th April 1994, creation of WTO formalized by GATT members at Marrakesh Morocco
1995: 1st January 1995 WTO came into existence.
All above rounds had not only boosted the world trade but also brought the countries closer to each other increasing the mutual understanding and feeling for each other’s problems and aspirations.
8. Essay on the Tokyo Round:
It began in 1973 in Tokyo attended by 99 contracting countries and was rounded off in 1979 in Geneva.
This was the most significant round of all the rounds so far, the major achievements of this round were as follows:
(i) Foundation for the legal framework for the conduct of international trade,
(ii) Recognition of the problems of the developing countries and the remedial measures thereof,
(iii) Agreement on non-subsidies and countervailing measures,
(iv) Agreement on technical barriers to trade also known as the standards code,
(v) Agreement on import licensing procedures,
(vi) Agreement on government purchases,
(vii) Agreement on customs valuation for a fair, uniform and neutral system,
(viii) Agreement on anti-dumping norms,
(ix) Agreement on civil aircraft, and
(x) Agreement on agricultural and industrial products.
In nutshell the Tokyo round provided for effective discipline in the conduct of the international trade and an elaborate system for the consultation and dispute settlement.
9. Essay on the Uruguay Round:
105 contacting countries attended the Uruguay round. The trade ministers of the contracting countries held a conference in Punta Del Este in September 1986. The declaration was divided into two sections, the first covered the trade negotiations in goods and the second covers the trade negotiations in service sectors of the international trade.
Agreement on goods sector of the international trade.
Its objective was:
i. To bring about further liberalization and expansion in international trade for the goods sector,
ii. To strengthen the role of GATT and improve the multilateral trading system, and
iii. To increase the responsiveness of GATT for the international economic environments.
Agreement on the service sector of the international trade.
The second part of the declaration covered the establishment of a multilateral framework of principles and rules for the trade in services including the elaboration of possible disciplines for individual sectors.
10. Essay on the Activities of GATT:
GATT treaty consisted of 38 main articles each one dealing with a specific issue, like:
Article No. I:
This contained the spirit of the treaty in the sense that each of the contracting country must guarantee the MFN treatment to all other contracting countries. This article stated that any “advantage, favour, privilege or immunity ” in regards to customs duties, payments and formalities in connection with imports and exports granted by a GATT country to another must automatically be extended to all other GATT countries.
Article No. II:
This contained the details of all the tariff reductions agreed upon by the contracting countries as a result of various trade negotiation conferences conducted under the GATT.
Article No. III:
This article prohibited the use of internal taxes to protect domestic products against imports.
Article No. VI:
This article dealt with the Anti-Dumping codes. According to this article the ‘dumped’ goods were broadly defined as imports which were sold at prices below those charged by the producer in his domestic market.
The anti-dumping duties could be imposed by the affected party as a defence against the dumped imports and bring certain of its provisions into line with the relevant provisions of the code on subsidies and countervailing measures.
Article No. VII:
This article dealt with the customs valuation and was divided into sub-groups covering the rules, administration, consultations, dispute settlement and special provisions for differential treatment
11. Essay on the Emergence of World Trade Organization:
The Uruguay round held in 1986 and attended by 115 contracting countries, provided the basic frame-work for the establishment of Multilateral Trade Organization (MTO) which was supposed to take over and carry forward all the work done under and in between the Havana Charter 1947 and GATT 1994.
The deadline fixed for all member countries to endorse their stamp of acceptance of all terms and conditions relating to the conduct of international trade was December 1994.
The endorsements were to be ratified by each member country’s government and thus based on the response received up to 31st December 1994 a new world wide treaty with wider scope and mutual binding and transparency and trust as the foundation emerged on 1st January 1995 and was called the World Trade Organization ‘WTO’.
It represents the desire of the trading countries to unify themselves in to a common code of conduct and to bring about transparency in the conduct of trade. Thus on the first day of the new year of 1995, for the first time in the history of our civilization a unified trading body was created to weed out the major cause of all the conflicts that the humans had been fighting for centuries.
For the first time we all realized that to trade is our right but with this right we also took upon us the duties as well for the economic welfare of the humanity. This was the beginning of a new era and the subsequent years proved know-how correct we all had been on this day of 1st January 1995.
12. Essay on the Beginning of Continuity despite Shortcomings:
As said earlier WTO/GATT was a treaty and not an organization and this was the basic difference which must be understood in order to comprehend the contributions that this organization will be making to enlarge and give momentum to the world trade movement.
The basic difference between an organization and a treaty is that the organization has enforcement powers for its policies but a treaty has no such powers, it works on mutual cooperation counseling and consent.
A treaty has fixed guidelines and all members are expected to follow those guidelines. The success of a treaty would depend on the individual and collective need factor of its members provided these needs are not parasitic in nature for others and that these needs are on reciprocal basis that is what one takes also gives to all others.
In this context these needs are the needs for a fair and free flow of the international trade. The individual and collective needs of the member countries is the result and creation of WTO and it will continue to function so long as the need factor is existing.
The enforcement shortcomings of the WTO would be overcome firstly by the need factor as said above and secondly by the group behaviour syndrome. This syndrome simply means that in a group the individuals tend to conform to the group behaviour.
The collective strength of the group forces the errant individual to fall in line with the group norms. The same strategy was expected to work for the success of WTO. The charter had scope for consultations and adjustments for any of the trade related conflicts and no individual howsoever great it could be, could go against the strength of the group.
When we are talking about the international trade then it simply means two segments of one identity. These two segments are the imports and the exports. There are exporters because there are importers. One can never remain in one role always.
It has to interchange the roles for the continuity of the system. This is the basis of the international trade and perhaps one of the cementing forces that will propel and give momentum to the movement called WTO. It has the inbuilt strength for continuity due to the collective need of the countries to regulate themselves in their conduct of the international trade.