Journey from GATT to WTO: History & meaning of GATT & WTO.

Journey from GATT to WTO: History & meaning of GATT & WTO. 1

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GATT- General Agreement on Trade & Tariff (Signed in 1948 & ended in 1994)

WTO- World Trade Organisation (Came into existence in 1995)

Bretton Woods Conference (1944)

GATT has its origin from the Bretton woods conference 1944 towards the end of World War-II. GATT began in 1947 with 23 members and forerunner of present day WTO which has 160 members, comprising approximately 96.4% of world trade.

Bretton Woods Conference  produced two of the most important international economic institutions of  the postwar period and one unsuccessful institute:-

i) International Monetary Fund

ii) World Bank

iii) International Trade Organisation (Unsuccessful)

Bretton Woods Conference while establishing the IMF and World Bank, also recognized the need for an international institution which would address growing trade concerns, i.e., ITO.

GATT (1948)

A draft agreement was prepared at Havana Conference in 1948 for establishment of ITO. This was called Havana Charter, which was signed by 53 off 56. But American Congress in 1950 made it clear that  it will not ratify Havana Charter. So, ITO could not be implemented.

So, temporary agreement on multilateral tariff reductions until the ITO was formed known as GATT- signed by 23 countries in January 1948. This temporary agreement provided the basis for the international trading system for 47 years. So, GATT is an agreement and not an organisation.

GATT was limited to removal tariff in the trade of goods. Also, removal of tariff related to trade in agriculture and textile was excluded from GATT, the reason of exclusion was that agriculture and textile are exported by developing country so it was strategy by developed nation to keep developing nation out of race advantages of GATT.

Protocol for Provisional Application:Countries who were contracting parties of GATT were free to implement only those provisions of the agreement which do not violate any existing law of the land. This special privilege was called Grandfather’s right. This right gave flexiblity to GATT.

GATT- Trade Rounds:

i) Geneva Round (1947)

ii) Annecy Round, France (1948)

iii) Torquay Round, Britain (1951)

iv) Geneva Round (1955)

v) Dillon Round, Geneva (1960-61)

vi) Kennedy Round, Geneva (1964-67)

vii) Tokyo Round (1973-79)

viii) Uruguay Round (1986-94) Important

Uruguay round covered following subjects:-

a) Tariff measures

b) Non-tariff measures

c) Services

d) IPR

e) Dispute settlement

f) Textile and agriculture

* g) Creation of WTO

World Trade Organisation (WTO)

WTO was born with the conclusion of Marrakesh agreement in the Uruguay Round of multilateral trade negotiations in 1994. WTO came into existence on 1st January 1995 with the membership of 128 countries.

Reasons for the replacement of GATT with WTO:-

  1. GATT dealt with only tariff barriers but by 1970s non-tariff barriers has also started increasing.
  2. GATT dealt with trade in goods. But by 1980s developed countries started having comparative advantages in trade in services.
  3. By 1980s, developing countries started pursuing export oriented growth. For eg- Singapore, etc.
  4. With these new demands, it was clear that the agenda of the GATT was going to expand well beyond the traditional issue areas of tariffs on goods.

Therefore, there was grand bargain for WTO in which developed countries agreed to include trade in agriculture & textile under  WTO  with some exception and developing countries allowed inclusion of trade in services and IPR under WTO.

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