The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote

international trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...

by reducing or eliminating

trade barrier Trade barriers are government-induced restrictions on international trade. According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency. Most trade barriers work o ...

s such as

tariffs A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and polic ...

quotas Quota may refer to: Economics * Import quota, a trade restriction on the quantity of goods imported into a country * Market Sharing Quota, an economic system used in Canadian agriculture * Milk quota, a quota on milk production in Europe * Indi ...

. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." The GATT was first discussed during the United Nations Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the

International Trade Organization The International Trade Organization (ITO) was the proposed name for an international institution for the regulation of trade. Led by the United States in collaboration with allies, the effort to form the organization from 1945 to 1948, with the ...

(ITO). It was signed by 23 nations in

Geneva Geneva ( ; french: Genève ) frp, Genèva ; german: link=no, Genf ; it, Ginevra ; rm, Genevra is the List of cities in Switzerland, second-most populous city in Switzerland (after Zürich) and the most populous city of Romandy, the French-speaki ...

on 30 October 1947, and was applied on a provisional basis 1 January 1948. It remained in effect until 1 January 1995, when the

World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...

(WTO) was established after agreement by 123 nations in

Marrakesh Marrakesh or Marrakech ( or ; ar, مراكش, murrākuš, ; ber, ⵎⵕⵕⴰⴽⵛ, translit=mṛṛakc}) is the fourth largest city in the Kingdom of Morocco. It is one of the four Imperial cities of Morocco and is the capital of the Marrakes ...

on 15 April 1994, as part of the

Uruguay Round The Uruguay Round was the 8th round of multilateral trade negotiations (MTN) conducted within the framework of the General Agreement on Tariffs and Trade (GATT), spanning from 1986 to 1993 and embracing 123 countries as "contracting parties". The R ...

Agreements. The WTO is the successor to the GATT, and the original GATT text (GATT 1947) is still in effect under the WTO framework, subject to the modifications of GATT 1994. Nations that were not party in 1995 to the GATT need to meet the minimum conditions spelled out in specific documents before they can accede; in September 2019, the list contained 36 nations. The GATT, and its successor the WTO, have succeeded in reducing tariffs. The average tariff levels for the major GATT participants were about 22% in 1947, but were 5% after the Uruguay Round in 1999. Experts attribute part of these tariff changes to GATT and the WTO.

History

The General Agreement on Tariffs and Trade is a multi-national trade treaty. It has been updated in a series of global trade negotiations consisting of nine ''rounds'' between 1947 and 1995. Its role in international trade was largely succeeded in 1995 by the

. During the 1940s, the United States sought to establish a set of post-war multilateral institutions, one of which would be devoted to the reconstruction of world trade. In 1945 and 1946, the U.S. took concrete steps to bring about such an organisation, proposing a conference to negotiate a charter for a trade organisation. The GATT was first conceived at the 1947

United Nations Conference on Trade and Employment United may refer to: Places * United, Pennsylvania, an unincorporated community * United, West Virginia, an unincorporated community Arts and entertainment Films * ''United'' (2003 film), a Norwegian film * ''United'' (2011 film), a BBC Two fi ...

(UNCTE), at which the

(ITO) was one of the ideas proposed. It was hoped that the ITO would be run alongside the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

and the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster globa ...

(IMF). More than 50 nations negotiated ITO and organising its founding charter, but after the withdrawal of the United States these negotiations collapsed.

Initial round

Preparatory sessions were held simultaneously at the UNCTE regarding the GATT. After several of these sessions, 23 nations signed the GATT on 30 October 1947 in Geneva, Switzerland. It came into force on 1 January 1948.

Annecy Round: 1949

The second round took place in 1949 in

Annecy Annecy ( , ; frp, Èneci or ) is the prefecture and largest city of the Haute-Savoie department in the Auvergne-Rhône-Alpes region of Southeastern France. It lies on the northern tip of Lake Annecy, south of Geneva, Switzerland. Nicknamed ...

, France. 13 countries took part in the round. The main focus of the talks was more tariff reductions, around 5,000 in total.

Torquay Round: 1951

The third round occurred in

Torquay Torquay ( ) is a seaside town in Devon, England, part of the unitary authority area of Torbay. It lies south of the county town of Exeter and east-north-east of Plymouth, on the north of Tor Bay, adjoining the neighbouring town of Paignton ...

, England in 1951. Thirty-eight countries took part in the round. 8,700 tariff concessions were made totalling the remaining amount of tariffs to ¾ of the tariffs which were in effect in 1948. The contemporaneous rejection by the U.S. of the

Havana Charter Havana (; Spanish: ''La Habana'' ) is the capital and largest city of Cuba. The heart of the La Habana Province, Havana is the country's main port and commercial center.

signified the establishment of the GATT as a governing world body.

Geneva Round: 1955–56

The fourth round returned to

in 1955 and lasted until May 1956. Twenty-six countries took part in the round. $2.5 billion in tariffs were eliminated or reduced.

Dillon Round: 1960–62

The fifth round occurred once more in

and lasted from 1960 to 1962. The talks were named after U.S. Treasury Secretary and former Under Secretary of State,

Douglas Dillon Clarence Douglas Dillon (born Clarence Douglass Dillon; August 21, 1909January 10, 2003) was an American diplomat and politician, who served as U.S. Ambassador to France (1953–1957) and as the 57th Secretary of the Treasury (1961–1965). He w ...

, who first proposed the talks. Twenty-six countries took part in the round. Along with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of the

European Economic Community The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisb ...

(

EEC The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisb ...

Kennedy Round: 1964–67

The sixth round of GATT multilateral trade negotiations, held from 1964 to 1967. It was named after U.S. President

John F. Kennedy John Fitzgerald Kennedy (May 29, 1917 – November 22, 1963), often referred to by his initials JFK and the nickname Jack, was an American politician who served as the 35th president of the United States from 1961 until his assassination ...

in recognition of his support for the reformulation of the United States trade agenda, which resulted in the Trade Expansion Act of 1962. This Act gave the President the widest-ever negotiating authority. As the Dillon Round went through the laborious process of item-by-item tariff negotiations, it became clear, long before the Round ended, that a more comprehensive approach was needed to deal with the emerging challenges resulting from the formation of the European Economic Community (EEC) and EFTA, as well as Europe's re-emergence as a significant international trader more generally. Japan's high economic growth rate portended the major role it would play later as an exporter, but the focal point of the Kennedy Round always was the United States-EEC relationship. Indeed, there was an influential American view that saw what became the Kennedy Round as the start of a transatlantic partnership that might ultimately lead to a transatlantic economic community. To an extent, this view was shared in Europe, but the process of European unification created its own stresses under which the Kennedy Round at times became a secondary focus for the EEC. An example of this was the French veto in January 1963, before the round had even started, on membership by the United Kingdom. Another was the internal crisis of 1965, which ended in the Luxembourg Compromise. Preparations for the new round were immediately overshadowed by the Chicken War, an early sign of the impact variable levies under the Common Agricultural Policy would eventually have. Some participants in the Round had been concerned that the convening of UNCTAD, scheduled for 1964, would result in further complications, but its impact on the actual negotiations was minimal. In May 1963 Ministers reached agreement on three negotiating objectives for the round: # Measures for the expansion of trade of developing countries as a means of furthering their economic development, # Reduction or elimination of tariffs and other barriers to trade, and # Measures for access to markets for agricultural and other primary products. The working hypothesis for the tariff negotiations was a linear tariff cut of 50% with the smallest number of exceptions. A drawn-out argument developed about the trade effects a uniform linear cut would have on the dispersed rates (low and high tariffs quite far apart) of the United States as compared to the much more concentrated rates of the EEC which also tended to be in the lower held of United States tariff rates. The EEC accordingly argued for an evening-out or harmonisation of peaks and troughs through its cerement, double cart and thirty: ten proposals. Once negotiations had been joined, the lofty working hypothesis was soon undermined. The special-structure countries (Australia, Canada, New Zealand and South Africa), so called because their exports were dominated by raw materials and other primary commodities, negotiated their tariff reductions entirely through the item-by-item method. In the end, the result was an average 35% reduction in tariffs, except for textiles, chemicals, steel and other sensitive products; plus a 15% to 18% reduction in tariffs for agricultural and food products. In addition, the negotiations on chemicals led to a provisional agreement on the abolition of the American Selling Price (ASP). This was a method of valuing some chemicals used by the noted States for the imposition of import duties which gave domestic manufacturers a much higher level of protection than the tariff schedule indicated. However, this part of the outcome was disallowed by Congress, and the American Selling Price was not abolished until Congress adopted the results of the Tokyo Round. The results on agriculture overall were poor. The most notable achievement was agreement on a Memorandum of Agreement on Basic Elements for the Negotiation of a World Grants Arrangement, which eventually was rolled into a new International Grains Arrangement. The EEC claimed that for it the main result of the negotiations on agriculture was that they "greatly helped to define its own common policy". The developing countries, who played a minor role throughout the negotiations in this round, benefited nonetheless from substantial tariff cuts particularly in non-agricultural items of interest to them. Their main achievement at the time, however, was seen to be the adoption of Part IV of the GATT, which absolved them from according reciprocity to developed countries in trade negotiations. In the view of many developing countries, this was a direct result of the call at UNCTAD I for a better trade deal for them. There has been argument ever since whether this symbolic gesture was a victory for them, or whether it ensured their exclusion in the future from meaningful participation in the multilateral trading system. On the other hand, there was no doubt that the extension of the Long-Term Arrangement Regarding International Trade in Cotton Textiles, which later became the Multi-Fiber Arrangement, for three years until 1970 led to the longer-term impairment of export opportunities for developing countries. Another outcome of the Kennedy Round was the adoption of an Anti-dumping Code, which gave more precise guidance on the implementation of Article VI of the GATT. In particular, it sought to ensure speedy and fair investigations, and it imposed limits on the retrospective application of anti-dumping measures.

Kennedy Round The Kennedy Round was the sixth session of General Agreement on Tariffs and Trade (GATT) multilateral trade negotiations held between 1964 and 1967 in Geneva, Switzerland. Congressional passage of the U.S. Trade Expansion Act in 1962 authorized the ...

took place from 1962 to 1967. $40 billion in tariffs were eliminated or reduced.

Tokyo Round: 1973–79

Reduced tariffs and established new regulations aimed at controlling the proliferation of non-tariff barriers and voluntary export restrictions. 102 countries took part in the round. Concessions were made on $19 billion worth of trade.

Formation of Quadrilateral Group: 1981

The

Quadrilateral Group The Quadrilateral group or the Quad is an informal group which includes the trade spokespersons of Canada, the European Union, Japan, and the United States. It was first suggested at a private meeting during the 7th G7 summit in July 1981. Initial ...

was formed in 1982 by the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...

, the United States, Japan and Canada, to influence the GATT.

Uruguay Round: 1986–94

The

began in 1986. It was the most ambitious round to date, as of 1986, hoping to expand the competence of the GATT to important new areas such as

services Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a p ...

capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used f ...

, intellectual property, textiles, and agriculture. 123 countries took part in the round. The

was also the first set of multilateral trade negotiations in which developing countries had played an active role. Agriculture was essentially exempted from previous agreements as it was given special status in the areas of

import quota An import quota is a type of trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time. Quotas, like other trade restrictions, are typically used to benefit the producers o ...

s and

export subsidies Export subsidy is a government policy to encourage export of goods and discourage sale of goods on the domestic market through direct payments, low-cost loans, tax relief for exporters, or government-financed international advertising. An export ...

, with only mild caveats. However, by the time of the Uruguay round, many countries considered the exception of agriculture to be sufficiently glaring that they refused to sign a new deal without some movement on agricultural products. These fourteen countries came to be known as the "

Cairns Group The Cairns Group (Cairns Group of Fair Trading Nations) is an interest group of 19 agricultural exporting countries, composed of Argentina, Australia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakist ...

", and included mostly small and medium-sized agricultural exporters such as Australia, Brazil, Canada,

Indonesia Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...

, and New Zealand. The Agreement on Agriculture of the Uruguay Round continues to be the most substantial

trade liberalisation Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...

agreement in agricultural products in the history of trade negotiations. The goals of the agreement were to improve market access for agricultural products, reduce domestic support of agriculture in the form of price-distorting

subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...

and quotas, eliminate over time export subsidies on agricultural products and to harmonise to the extent possible sanitary and phytosanitary measures between member countries.

GATT and the World Trade Organization

In 1993, the GATT was updated ('GATT 1994') to include new obligations upon its signatories. One of the most significant changes was the creation of the

(WTO). The 76 existing GATT members and the

European Communities The European Communities (EC) were three international organizations that were governed by the same set of institutions. These were the European Coal and Steel Community (ECSC), the European Atomic Energy Community (EAEC or Euratom), and the ...

became the founding members of the WTO on 1 January 1995. The other 51 GATT members rejoined the WTO in the following two years (the last being Congo in 1997). Since the founding of the WTO, 33 new non-GATT members have joined and 22 are currently negotiating membership. There are a total of 164 member countries in the WTO, with

Liberia Liberia (), officially the Republic of Liberia, is a country on the West African coast. It is bordered by Sierra Leone to Liberia–Sierra Leone border, its northwest, Guinea to its north, Ivory Coast to its east, and the Atlantic Ocean ...

and

Afghanistan Afghanistan, officially the Islamic Emirate of Afghanistan,; prs, امارت اسلامی افغانستان is a landlocked country located at the crossroads of Central Asia and South Asia. Referred to as the Heart of Asia, it is bordere ...

being the newest members as of 2018. Of the original GATT members,

Syria Syria ( ar, سُورِيَا or سُورِيَة, translit=Sūriyā), officially the Syrian Arab Republic ( ar, الجمهورية العربية السورية, al-Jumhūrīyah al-ʻArabīyah as-Sūrīyah), is a Western Asian country loc ...

Lebanon Lebanon ( , ar, لُبْنَان, translit=lubnān, ), officially the Republic of Lebanon () or the Lebanese Republic, is a country in Western Asia. It is located between Syria to the north and east and Israel to the south, while Cyprus li ...

and the

SFR Yugoslavia The Socialist Federal Republic of Yugoslavia, commonly referred to as SFR Yugoslavia or simply as Yugoslavia, was a country in Central and Southeast Europe. It emerged in 1945, following World War II, and lasted until 1992, with the breakup of Yug ...

have not rejoined the WTO. Since

FR Yugoslavia Serbia and Montenegro ( sr, Cрбија и Црна Гора, translit=Srbija i Crna Gora) was a country in Southeast Europe located in the Balkans that existed from 1992 to 2006, following the breakup A relationship breakup, breakup, or ...

(renamed as

Serbia and Montenegro Serbia and Montenegro ( sr, Cрбија и Црна Гора, translit=Srbija i Crna Gora) was a country in Southeast Europe located in the Balkans that existed from 1992 to 2006, following the breakup of the Socialist Federal Republic of Yu ...

and with membership negotiations later split in two), is not recognised as a direct SFRY successor state; therefore, its application is considered a new (non-GATT) one. The General Council of WTO, on 4 May 2010, agreed to establish a working party to examine the request of

for WTO membership. The contracting parties who founded the

WTO The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and e ...

ended official agreement of the "GATT 1947" terms on 31 December 1995.

Montenegro ) , image_map = Europe-Montenegro.svg , map_caption = , image_map2 = , capital = Podgorica , coordinates = , largest_city = capital , official_languages = M ...

became a member in 2012, while

Serbia Serbia (, ; Serbian language, Serbian: , , ), officially the Republic of Serbia (Serbian language, Serbian: , , ), is a landlocked country in Southeast Europe, Southeastern and Central Europe, situated at the crossroads of the Pannonian Bas ...

is in the decision stage of the negotiations and is expected to become a member of the WTO in the future. Whilst GATT was a set of rules agreed upon by nations, the WTO is an

intergovernmental organisation An international organization or international organisation (see spelling differences), also known as an intergovernmental organization or an international institution, is a stable set of norms and rules meant to govern the behavior of states an ...

with its own headquarters and staff, and its scope includes both traded goods and trade within the

service sector The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sectors in the three-sector model (also known as the economic cycle). The others are the primary sector (raw materials) and the second ...

and

intellectual property rights Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...

. Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations (particularly the Tokyo Round)

plurilateral A plurilateral agreement is a multi-national legal or trade agreement between countries. In the jargon of global economics, it is an agreement between more than two countries, but not a great many, which would be multilateral agreement. Use of the ...

agreements created selective trading and caused fragmentation among members. WTO arrangements are generally a multilateral agreement settlement mechanism of GATT.

Effects on trade liberalisation

The average tariff levels for the major GATT participants were about 22 per cent in 1947. As a result of the first negotiating rounds, tariffs were reduced in the GATT core of the United States, United Kingdom, Canada, and Australia, relative to other contracting parties and non-GATT participants. By the Kennedy round (1962–67), the average tariff levels of GATT participants were about 15%. After the Uruguay Round, tariffs were under 5%. In addition to facilitating applied tariff reductions, the early GATT's contribution to trade liberalisation "include binding the negotiated tariff reductions for an extended period (made more permanent in 1955), establishing the generality of non-discrimination through most-favoured nation (MFN) treatment and

national treatment National treatment is a principle in international law. Utilized in many treaty regimes involving trade and intellectual property, it requires equal treatment of foreigners and locals. Under national treatment, a state that grants particular right ...

status, ensuring increased transparency of trade policy measures, and providing a forum for future negotiations and for the peaceful resolution of bilateral disputes. All of these elements contributed to the rationalization of trade policy and the reduction of trade barriers and

policy uncertainty Policy uncertainty (also called regime uncertainty) is a class of economic risk where the future path of government policy is uncertain, raising risk premia and leading businesses and individuals to delay spending and investment until this uncertai ...

." According to Dartmouth economic historian Douglas Irwin,

The prosperity of the world economy over the past half century owes a great deal to the growth of world trade which, in turn, is partly the result of farsighted officials who created the GATT. They established a set of procedures giving stability to the trade-policy environment and thereby facilitating the rapid growth of world trade. With the long run in view, the original GATT conferees helped put the world economy on a sound foundation and thereby improved the livelihood of hundreds of millions of people around the world.

Article 24

Following the United Kingdom's vote to withdraw from the European Union, supporters of leaving the EU suggested that Article 24, paragraph 5B of the treaty could be used to maintain a "standstill" in trading conditions between the UK and the EU in the event of the UK leaving the EU without a trade deal, hence preventing the introduction of tariffs. According to proponents of this approach, it could be used to implement an interim agreement pending negotiation of a final agreement lasting up to ten years. This claim formed the basis of the so-called "

Malthouse A malt house, malt barn, or maltings, is a building where cereal grain is converted into malt by soaking it in water, allowing it to sprout and then drying it to stop further growth. The malt is used in brewing beer, whisky and in certain food ...

compromise" between

Conservative party The Conservative Party is a name used by many political parties around the world. These political parties are generally right-wing though their exact ideologies can range from center-right to far-right. Political parties called The Conservative P ...

factions as to how to replace the withdrawal agreement. However, this plan was rejected by parliament. The claim that Article 24 might be used was also adopted by

Boris Johnson Alexander Boris de Pfeffel Johnson (; born 19 June 1964) is a British politician, writer and journalist who served as Prime Minister of the United Kingdom and Leader of the Conservative Party from 2019 to 2022. He previously served as F ...

during his 2019 campaign to lead the Conservative Party. The claim that Article 24 might be used in this way has been criticised by

Mark Carney Mark Joseph Carney (born March 16, 1965) is a Canadian economist and banker who served as the governor of the Bank of Canada from 2008 to 2013 and the governor of the Bank of England from 2013 to 2020. Since October 2020, he is vice chairman and ...

Liam Fox Liam Fox (born 22 September 1961) is a British politician who served as Secretary of State for International Trade from 2016 to 2019 and Secretary of State for Defence from 2010 to 2011. A member of the Conservative Party, Fox has served as t ...

and others as being unrealistic given the requirement in paragraph 5c of the treaty that there be an agreement between the parties for paragraph 5b to be of use as, in the event of a "no-deal" scenario, there would be no agreement. Moreover, critics of the GATT 24 approach point out that services would not be covered by such an arrangement.

References

External links