GATT

THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)
Despite wide ranging benefits, a number of countries hinder the free flow of international trade by imposing trade barriers. It was felt necessary that all countries embark on cooperative economic relations for establishing mutual self- interest. The General Agreement on Tariffs and Trade (GATT) provided the rules for much of world trade for 47 years, from 1948 to 1994; but it was only a multilateral instrument governing international trade or a provisional agreement along with the two full-fledged “Bretton Woods” institutions, the World Bank and the International Monetary Fund. The original intention to create an International Trade Organization (ITO) as a third institution to handle the trade side of international economic cooperation did not succeed for want of endorsement by some national legislatures, especially the US. Eight rounds of multilateral negotiations known as “trade rounds” held under the auspices GATT resulted in substantial international trade liberalization. Though the GATT trade rounds in earlier years contemplated tariff reduction as their core issue, later on the Kennedy Round in the mid-sixties, and the Tokyo Round in the 1970s led to massive reductions in bilateral tariffs, establishment of negotiation rules and procedures on dispute resolution, dumping and licensing. The arrangements were informally referred to as ‘codes’ because they were not acknowledged by the full GATT membership. A number of codes were ultimately amended in the Uruguay Round and got converted into multilateral commitments accepted by all WTO members. The eighth, the Uruguay Round of 1986-94, was the last and most consequential of all rounds and culminated in the birth of WTO and a new set of agreements.

The GATT lost its relevance by 1980s because

• it was obsolete to the fast evolving contemporary complex world trade scenario characterized by emerging globalisation.
•  international investments had expanded substantially
•  intellectual property rights and trade in services were not covered by GATT
•  world merchandise trade increased by leaps and bounds and was beyond its scope
•  the ambiguities in the multilateral system could be heavily exploited
•  efforts at liberalizing agricultural trade were not successful
•  there were inadequacies in institutional structure and dispute settlement system
•  it was not a treaty and therefore terms of GATT were binding only insofar as they are not incoherent with a nation’s domestic rules.