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General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade (GATT) – a multilateral commercial treaty – was negotiated as an interim measure to facilitate tariff reductions until the full-fledged International Trade Organization (ITO) came into force. With the failure of the ITO, the GATT ended up regulating international trade for 47 years and became the main forum through which world trade was organised.

When it was signed by 23 countries, in January 1948, the GATT dealt mainly with tariff barriers relating to trade in goods. Unlike the aborted ITO, it did not intervene in the domestic affairs of signatory nations and was involved only in relations between governments. The GATT was also little more than a negotiating forum of ‘contracting parties’ and did not have the formal status of an international organisation. In fact, it was no more than the commercial policy chapter of the ITO, and had only a weak dispute settlement mechanism. Emphasising its provisional nature, its small secretariat was called the Interim Commission for the International Trade Organization. The treaty did, however, establish the principle of Most Favoured Nation (MFN) status by requiring all contracting parties not to discriminate between each other, although the principle allowed exceptions such as imperial preferences and regional agreements.

Eleven of the original signatories to the GATT were developing countries, but the treaty did not represent a breakthrough for smaller states. Participation in the theoretically one-member-one-vote treaty was in practice not easy, and most developing countries (with some exceptions like Brazil and India) found themselves excluded from ‘Green Room’ decision-making meetings. The marginalisation of developing countries ensured that the major economic powers could use the GATT to protect domestic industries in which they did not enjoy an export advantage, including agriculture and textiles.

During the first two decades of its existence, GATT mechanisms reflected the interim nature of its birth. Its remit barely strayed beyond tariff barrier issues. However, the Kennedy Round (1964-67) and Tokyo Round (1973-79) negotiations saw contracting parties addressing newer forms of non-tariff barriers to trade. At the same time, the size of the GATT increased dramatically as developing countries acceded in record numbers. By the time of the Uruguay Round (1986-94), and to reflect the changing comparative advantage of the developed nations, the GATT had extended its scope of activity to include, for example, trade in services, trade-related investment measures, and trade-related intellectual property rights. In return, developing countries were promised concessions on agriculture, textiles and industrial goods.

The GATT survived for 47 years because its structural weakness and limited scope ensured that the major economies, and especially the US, did not feel encumbered by a tightly disciplined organisation. Developing countries too had shown considerable commitment to the GATT, as their rising numbers within it illustrated. They may have complained about their marginalisation from key decision-making and negotiation processes, but at least the GATT offered them a rules-based system within which they could bargain. Symptomatic of the GATT’s success were its unexpected longevity as well as the large numbers of countries that had signed up to it – with the conclusion of the Uruguay Round, in 1994, 123 participating countries were participating in the GATT, which gave it near complete global reach.

With thanks to Amrita Narlikar for allowing the use of her excellent study, The World Trade Organization: A Very Short Introduction, Oxford: Oxford University Press, 2005