The General Agreement on Trade and Tariffs. World Trade.
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The WTO's predecessor, the GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation - notably the "Bretton Woods" institutions now known as the World Bank and the International Monetary Fund.
The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements,restrictive business practices, international investment and services.
For a start, a trade round allows participants to seek and secure advantages across a wide range of issues.
Second, concessions which are necessary but would otherwise be difficult to defend in domestic political terms, can be made more easily in the context of a package which also contains politically and economically attractive benefits.
The results included an average one-third cut in customs duties in the world's nine major industrial markets, bringing the average tariff on manufactured products down to 4.7 percent compared with about 40 per cent at the time of GATT's creation.
The tariff reductions, phased in over a period of eight years, involved an element of harmonization, bringing the highest tariffs down proportionately more than the lowest.
Nevertheless, a series of agreements on non-tariff barriers did emerge from the negotiations, in some cases interpreting existing GATT rules, in others breaking entirely new ground.
In most cases, only a relatively small number of, mainly industrialized, GATT members ascribed to these agreements and arrangements which, as a consequence, were often referred to as "codes". They include the following agreements:
Those on subsidies and countervailing measures, technical barriers to trade, import licensing, customs valuation and anti-dumping, are now multilateral commitments within the WTO Agreement -in other words, all WTO members are committed to them - while those on government procurement, bovine meat, dairy products and civil aircraft remain "plurilateral" agreements.
Continual reductions in tariffs alone helped spur very high rates of world trade growth - around 8 per cent a year on average - during the 1950s and 1960s.
And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the GATT era.
The rush of new members during the Uruguay Round demonstrated that the multilateral trading system, as then represented by GATT, was recognized as an anchor for development and an instrument of economic and trade reform.
GATT's success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition.
High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade.
Both these changes undermined the credibility and effectiveness of GATT.
For a start, world trade had become far more complex and important than 40 years before:
the globalization of the world economy was underway, international investment was exploding and trade in services - not covered by the rules of GATT - was of major interest to more and more countries and, at the same time, closely tied to further increases in world merchandise trade.
for instance, with respect to agriculture where loopholes in the multilateral system were heavily exploited - and efforts at liberalizing agricultural trade met with little success - and in the textiles and clothing sector where an exception to the normal disciplines of GATT was negotiated in the form of the Multifibre Arrangement.
Even the institutional structure of GATT and its dispute settlement system were giving cause for concern.
They were able to accept a negotiating agenda which covered virtually every outstanding trade policy issue including the extension of the trading system into several new areas, notably trade in services and intellectual property.
It was the biggest negotiating mandate on trade ever agreed and Ministers gave themselves four years to complete it.
This took the form of a Ministerial Meeting in Montreal, Canada, and led to the elaboration of the negotiating mandate for the second stage of the Round.
Ministers agreed a package of early results which included some concessions on market access for tropical products - aimed to assist developing countries - as well as a streamlined dispute settlement system and the Trade Policy Review Mechanism which provided for the first comprehensive, systematic and regular reviews of national trade policies and practices of GATT members.
By December 1991, a comprehensive draft text of the "Final Act", containing legal texts fulfilling every part of the Punta del Este mandate, with the exception of market access results, was on the table in Geneva.
For the following two years, the negotiations lurched continuously from impending failure to predictions of imminent success.
Several deadlines came and went; farm trade was joined by services, market access, anti-dumping rules and the proposed creation of a new institution, as the major points of conflict; and differences between the United States and European Communities became central to hopes for a final, successful conclusion.
It took until 15 December 1993 for every issue to be finally resolved and for negotiations on market access for goods and services to be concluded.
On 15 April 1994, the deal was signed by Ministers from most of the 125 participating governments at a meeting in Marrakesh, Morocco.
The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following:
- The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat.
- The GATT was applied on a "provisional basis" even if, after more than forty years, governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent.
- The GATT rules applied to trade in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property.
The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership.
- The WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.
The "GATT 1947" will continue to exist until the end of 1995, thereby allowing all GATT member countries to accede to the WTO and permitting an overlap of activity in areas like dispute settlement.
Moreover, GATT lives on as "GATT 1994", the amended and up-dated version of GATT 1947, which is an integral part of the WTO Agreement and which continues to provide the key disciplines affecting international trade in goods.
It’s a way of increasing corporate profits, of course. And it’s much easier to do with a free flow of capital
To quote the business press, we’re creating “a new imperial age” with a “de facto world government.”
It has its own institutions —like the International Monetary Fund (IMF) and the World Bank, trading structures like NAFTA and GATT (the North American Free Trade Agreement and the General Agreement on Tariffs and Trade), executive meetings like the G 7 (the seven richest industrial countries ; the US, Canada, Japan, Germany, Britain, France, and Italy — who meet regularly to discuss economic policy) and the European Community bureaucracy.