GATT refers to the General Agreement on Tariffs and Trade, and it is considered to be the most important source of the law of world trade, the GATT is still in effect despite the fact that it has become a part of the World Trade Organization since it establishment back in 1995, the number of nations who have entered the WTO have reached up to 164 nations and they also comply with the GATT provisions.
Opening markets can be beneficial, but it also requires adjustment. The WTO agreements allow countries to introduce changes gradually, through “progressive liberalization”. Developing countries are usually given longer to fulfil their obligations.
When the GATT was established in 1947, GATT is defined as a multilateral agreement that regulates international trade, it was initially intended and concentrated on reducing tariffs, but after that it started to try to end barriers to trade other than tariffs such as non-tariff barriers on goods, intellectual property and services, and there were also other hopes of creating another chart which was the ITO, but it didn’t see the light, and the GATT remained alone until we reached to the Uruguay round that lasted between 1986 and 1994 and led to the creation of WTO and other new agreements.
In order to open markets and allow international trade to exist, several and various adjustments need to take place, and the agreements of the WTO allow countries to change gradually to fulfill the obligations of international trade.
Purpose of the GATT and WTO
The purpose of GATT was to eliminate harmful trade protectionism. That had sent global trade down 65 percent during the Great Depression. GATT restored economic health to the world after the devastation of the depression and World War II. The horrors and destruction that was caused by World War II was huge and it had a very negative effect on the international economy, and the international community found itself responsible for reforming the global economy, GATT was the way that the international community used to increase international trade through the elimination of trade barriers, especially tariffs, GATT was needed in order to raise the standard of living, achieve full employment, increase the real income by providing opportunities for international trade, in addition to efficient usage of resources and supporting the developing countries.
The basic principles of the GATT and WTO
The WTO and the GATT work on enhancing free trade, Promoting fair competition and encouraging development and economic reform. And there are three essential principles of the GATT and WTO and they are as follow:
The first principle is the principle of non-discrimination; all members must be treated equally when it comes to tariffs. It excluded the special tariffs among members of the British Commonwealth and customs unions. It permitted tariffs if their removal would cause serious injury to domestic producers. and this principle is made to guarantee the freedom of trade in all the member countries, this principle is also designed to ensure fair conditions of trade, and on the basis of this idea, the principle of the most favored nation or the MFN principle was made.
The principle of MFN states that if a country gives a specific country some financial or trade advantage then it has to give this advantage to all countries that have signed the GATT, but there might be some exceptions that applies to specific goods that would be traded within a group.
The reciprocity principle states that in case any benefits exist between countries regarding the reduction of tariffs and the facilitating of market access have to be extended to include all WTO countries.
For having a transparent and effective international system of trade, there should be a harmonization of the system of import protection, and that will result in the reduction of barriers, and in order to do that, the GATT reduced the use of quotas.