The General Agreement on Tariffs and Trade (GATT), established in 1947, stands
as a historic milestone in the realm of international trade. It emerged as a
pivotal response to the aftermath of World War II, with the recognition that
economic cooperation was imperative to rebuild nations and foster global
The primary objective of GATT was to reduce barriers to trade,
facilitate economic growth, and provide a framework for international
cooperation on matters related to trade. Over the course of its existence, GATT
evolved and eventually paved the way for the formation of the World Trade
Organization (WTO). This article delves into the rich history of GATT, explores
its key provisions, and examines its profound impact on international trade.
Origins and Creation of GATT
The roots of GATT can be traced back to the aftermath of World War II when the
international community recognized the need for economic cooperation to rebuild
war-torn nations and foster global prosperity. In 1947, representatives from 23
countries convened in Geneva to negotiate a multilateral agreement aimed at
reducing barriers to international trade. The result was the signing of the
General Agreement on Tariffs and Trade (GATT) on October 30, 1947.
Key Provisions of GATT
GATT's most fundamental principle was the principle of non-discrimination. This principle was embodied in two key provisions: the Most-Favored-Nation (MFN) principle and the National Treatment principle. The MFN principle ensured that any favorable treatment granted to one member country would be extended to all other members, preventing discriminatory trade practices. The National Treatment principle required member countries to treat foreign goods and services no less favorably than domestic goods and services once they entered their markets.
- Tariff Reduction:
GATT aimed to reduce tariffs, which are taxes on imports, and other trade barriers. Through a series of negotiations called "rounds," member countries agreed to lower tariff rates on a wide range of products. The most notable rounds included the Kennedy Round (1964-1967) and the Uruguay Round (1986-1994), which resulted in substantial reductions in tariffs across various sectors.
- Dispute Settlement:
GATT established a system for resolving trade disputes between member countries. The Dispute Settlement Mechanism (DSM) provided a structured process for settling disputes, including consultations, panels, and the possibility of sanctions. The DSM ensured that countries could address trade grievances in a fair and transparent manner, promoting stability and predictability in international trade.
GATT's Impact on International Trade
Expansion of Trade:
GATT's efforts to reduce tariffs and trade barriers led to a significant
expansion of global trade. Between 1947 and 1994, the value of world merchandise exports increased from $58
billion to $4.62 trillion. GATT's emphasis on non-discrimination and tariff reductions facilitated greater
market access for goods and services, stimulating economic growth and raising living standards worldwide.
GATT's rounds of negotiations, particularly the Kennedy Round and the
Uruguay Round, played a crucial role in trade liberalization. These negotiations resulted in the progressive
reduction of tariffs on industrial goods, agricultural products, and services, making international trade
more competitive and efficient. Trade liberalization under GATT fostered specialization, increased
productivity, and encouraged innovation.
Multilateralism and Stability:
GATT promoted multilateralism by providing a platform for
member countries to negotiate trade agreements and resolve disputes. The multilateral trading system
established by GATT encouraged cooperation and consensus-building among nations. By establishing rules-based
trade relations, GATT provided stability and predictability to international trade, reducing uncertainty and
promoting long-term investment.
Developing Country Participation:
GATT's principles of non-discrimination and special and
differential treatment allowed developing countries to participate in global trade on more equitable terms.
GATT provided developing countries with flexibility in implementing trade policies, enabling them to protect
domestic industries and pursue economic development. GATT's provisions helped integrate developing countries
into the global trading system, fostering their economic growth and poverty reduction.
Evolution into the World Trade Organization (WTO)
Recognizing the need to modernize the international trading system, GATT's
member countries negotiated the establishment of the World Trade Organization (WTO).
The WTO was officially established on January 1, 1995, and superseded GATT.
While GATT focused primarily on trade in goods, the WTO expanded its scope to
include services, intellectual property rights, and investment. The WTO built
upon GATT's principles and institutionalized its dispute settlement mechanism,
providing a stronger legal framework for international trade.
The General Agreement on Tariffs and Trade (GATT) played a pivotal role in
promoting international trade and fostering economic cooperation. By
establishing rules-based trade relations, reducing tariffs, and providing a
forum for dispute settlement, GATT stimulated global economic growth, expanded
trade, and facilitated the integration of developing countries into the world
economy. Although GATT has been succeeded by the World Trade Organization (WTO),
its legacy continues to shape the international trade landscape and guide the
principles of fair and open trade.
The General Agreement on Tariffs and Trade (GATT) left an indelible mark on the
world stage, forever altering the dynamics of international trade. From its
inception in 1947 to its transformation into the World Trade Organization (WTO),
GATT exemplified the spirit of cooperation and the pursuit of economic growth
through open and fair trade.
Its core principles of non-discrimination, tariff
reduction, and dispute settlement created a stable and predictable multilateral
trading system that fostered economic integration and development. GATT's impact
was far-reaching, enabling the expansion of trade, promoting trade
liberalization, facilitating the participation of developing countries, and
establishing a rules-based framework that has guided international trade
relations to this day.
While GATT has given way to the WTO, its legacy continues to shape the global
trade landscape. The principles and values enshrined in GATT remain as the
foundation of the WTO's work, ensuring that the spirit of open and fair trade
endures. As the world continues to navigate the complexities of a globalized
economy, the lessons learned from GATT's history serve as a testament to the
power of international cooperation and collective action in fostering economic
prosperity for all nations.
By acknowledging and appreciating the transformative
impact of GATT, we can strive for a future where trade remains an engine of
growth, fostering sustainable development, and creating opportunities for the
betterment of all.
- World Trade Organization, "Trade and Development: WTO Rules and
Developing Countries," accessed May 20, 2023,
- World Trade Organization, "Understanding the WTO: What We Stand For,"
accessed May 20, 2023, https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm.
- General Agreement on Tariffs and Trade, October 30, 1947, available at https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm.
- "The GATT Years: From Havana to Marrakesh," World Trade Organization, accessed May 20, 2023, https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm.
- Marc L. Busch and Eric Reinhardt, "GATT and the Liberalization of World Trade: A Long-Term Perspective," The World Economy 21, no. 6 (1998): 789-835.
- "Trade Data and Analysis," World Trade Organization, accessed May 20, 2023, https://www.wto.org/english/res_e/statis_e/statis_e.htm.
- Jeffrey J. Schott and Jayashree Watal, "Trade Liberalization in the Uruguay Round: What the Modelers Projected," The World Economy 20, no. 3 (1997): 317-356.