All About GATT

General Agreement on Tariffs and Trade (GATT) was an international trade agreement signed in
1947. 23 nations were signatories of this trade agreement. GATT came into effect on January 1,
1948. The purpose of GATT was to liberalize trade by reducing tariffs and reducing quotas
among member countries. The member nations had to remove all the trade discriminations. The
7 rounds of negotiations from 1947 to 1993 reduced average tariffs on industrial goods from
40% to 5%. The steps taken at GATT led to economic globalization.
The GATT was established to set out regulations to eliminate or limit the most costly and
inefficient characteristics of the pre-war protectionist period, notably quantitative trade barriers
like trade restrictions and quotas. The agreement also established a mechanism for resolving
international commercial disputes, as well as a framework for multilateral tariff reduction
discussions. In the post-war years, the GATT was seen as a great success. Trade without
discrimination was one of the GATT’s major accomplishments. Every GATT signatory was to
be treated on an equal footing with the others.
The ‘most-favored-nation’ concept, as it is known, has been carried over into the WTO. As a
result, once a nation had negotiated a tariff reduction with a few other countries (generally its
most significant trade partners), the same reduction would be applied to all GATT members.
There were escape provisions in place, allowing nations to negotiate exclusions if tariff reduction
would disproportionately hurt domestic producers. When it came to determining tariffs, most
countries used the most-favored-nation approach, which virtually supplanted quotas. Other broad
requirements were consistent customs laws and each signatory nation’s commitment to negotiate
tariff reductions upon another’s request. Contracting nations might change agreements if their
local producers incurred disproportionate losses as a result of trade concessions, according to an
escape clause.
HISTORY BEHIND THE GENERAL AGREEMENT ON TARIFFS AND TRADE
The GATT’s main focus was on resolving individual trade concerns affecting specific
commodities or trading states, although large multilateral trade conferences were conducted on a
regular basis to hammer out tariff reductions and other issues. From 1947 to 1993, seven such
“rounds” were held, beginning with those in Geneva in 1947 (concurrent with the signing of the
general agreement), Annecy, France, in 1949, Torquay, England, in 1951, and Geneva in 1956
and again in 1960–62. The Kennedy Round (1964–67), the Tokyo Round (1973–79), and
the Uruguay Round (1986–94) were the most important rounds, all held in Geneva. These
agreements were successful in lowering average tariffs on industrial goods throughout the world
from 40% of their market value in 1947 to less than 5% in 1993.
The Uruguay Round was the most comprehensive collection of trade liberalization accords ever
negotiated by the GATT. At the end of the round, a global trade deal was signed that dropped
tariffs on industrial products by an average of 40%, decreased agricultural subsidies, and
contained ground-breaking new accords on services trade. The agreement also established the
World Trade Organization (WTO) as a new and stronger global organization tasked with
monitoring and regulating international trade. With the completion of the Uruguay Round on
April 15, 1994, GATT ceased to function. The WTO established its principles and the numerous
trade agreements achieved under its auspices.
The 550-page “Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Discussions,” signed by ministers in Marrakesh on April 15, 1994, comprised of legal provisions
outlining the results of the negotiations since the Round began in Punta del Este, Uruguay, in
September 1986. The Final Act also included texts of ministerial decisions and declarations that
explained important terms of the agreements. With two notable exceptions, the final act covered
all of the bargaining topics mentioned in the Punta del Este Declaration. The first was the
outcome of “market access discussions,” in which individual nations had made legally
enforceable pledges to decrease or abolish certain tariffs and non-tariff trade obstacles. National
schedules, which were an important element of the Final Act, were used to record these
concessions. The second was the “first pledges” on service trade liberalization. These
liberalization pledges were also included in national schedules.

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General Agreement on Tariffs and Trade (GATT) was an international trade agreement signed in

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