Presentation 6: GATT Trade Agreements PDF

Presentation 6 Main Features of GATT I. Objectives The General Agreement on Tariffs and Trade (GATT) 1994 is the most important legal source of world trade law. The GATT of 1947 as well as all legal sources agreed to before the date of entry into force of the WTO Agreement were included in GATT 1994...

Presentation 6 Main Features of GATT I. Objectives The General Agreement on Tariffs and Trade (GATT) 1994 is the most important legal source of world trade law. The GATT of 1947 as well as all legal sources agreed to before the date of entry into force of the WTO Agreement were included in GATT 1994. GATT pursues several goals that are explicitly mentioned, as for example: increasing the standard of living, realising full employment, increasing the real incomes and the effective demand as well as increasing production. The complete development and utilization of global natural resources and the increase of the exchange of goods are mentioned as external economic goals. As extensively described in GATT 1947, Article XXXVI, particular attention was given to the developing countries. The establishment of legal certainty, e.g. by duty of information and transparency or dispute settlement, remains a functional goal. 2 GATT main principles: Non-discrimination: Most Favored Nation (MFN) principle. National Treatment principle. Quantitative restrictions. Principle of reciprocity. Principle of Liberalization and transparency. Exceptions to the principles: 3 Successes and Shortcomings of GATT: 1. Successes: From 1948 until the advent of the WTO, the General Agreement was the principal international agreement regulating trade between nations. The General Agreement and its related side agreements covered almost all aspects of trade in goods, and the GATT system significantly promoted trade liberalization through its sponsorship of eight rounds of trade negotiations and its provision of a mechanism for settling trade disputes between its contracting parties. Initially, the negotiating rounds focused on tariff reductions and they achieved noteworthy success. In the case of the major industrialized countries, average tariffs fell from around 40% at the end of World War II to less than 5% today. GATT has been credited with considerable success in removing barriers to trade in goods, as evidenced by the fact that the annual growth rate of world merchandise trade has typically exceeded, by significant amounts, the growth in the output of national economies. 4 2. Shortcomings of GATT: There was no formal organizational structure under which it could conduct its affairs. Although the GATT contracting parties managed to create an informal structure in which it could operate, the lack of a formal structure was viewed as a shortcoming. there was in fact limited applicability of the agreed-upon rules: some, mainly industrialized, contracting parties abide themselves by the agreements concluded in Tokyo round and accepted those agreements. there was considerable variation in the obligations undertaken by the various contracting parties. Another aspect of this problem was that many, particularly developing country, contracting parties had bound (i.e., agreed to limits on) relatively few of their tariff lines. 5 Shortcomings of GATT …… Third, although GATT rules in principle applied to trade in all products, over time two major areas of trade — agriculture, and clothing and textiles — had effectively escaped GATT disciplines. Similarly, although GATT rules provided for the possibility of imposing safeguard measures to protect industries injured by imports in defined circumstances, those rules were largely ignored and parties accomplished safeguard goals through the use of voluntary export restraints, that were of questionable legality under GATT rules, although largely tolerated by those concerned. This breakdown in the application of the agreed-upon rules was viewed as undermining the idea of GATT as a rule-based multilateral-trading system. 6 Shortcomings of GATT …… Finally, although GATT’s dispute settlement system had operated relatively well, especially when compared to other forms of state-to-state dispute settlement, there were problems apparent in its functioning. In some cases, there were considerable delays in various parts of the process. More significantly, the practice of consensus decision-making in GATT had led to the odd situation where a losing party in a dispute settlement proceeding could prevent the adoption by GATT of the relevant dispute settlement report and thereby avoid losing. Therefore: The eighth round of GATT trade negotiations — the Uruguay Round (1986-1994) — eventually came to address all of these problems and while doing so also created a new organization with a much broader scope of action — the World Trade Organization. 7