General Agreement on Tariffs and Trade

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General Agreement on Tariffs and Trade

(GATT), former specialized agency of the United Nations. It was established in 1948 as an interim measure pending the creation of the International Trade Organization. However, plans for the latter were abandoned and GATT continued to exist until the end of 1995. Members of GATT were pledged to work together to reduce tariffs and other barriers to international trade and to eliminate discriminatory treatment in international commerce. The most important service of GATT was to negotiate multilateral extensions of tariff reductions through the application of the most-favored-nation clausemost-favored-nation clause
(MFN), provision in a commercial treaty binding the signatories to extend trading benefits equal to those accorded any third state. The clause ensures equal commercial opportunities, especially concerning import duties and freedom of investment.
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. GATT also provided for regular meetings to consider other problems of international trade. An important GATT principle was that protection of domestic industries was to be done strictly through tariffs and not measures such as import quotas. The only exceptions permitted to GATT rules were those dealing with balance of paymentsbalance of payments,
balance between all payments out of a country within a given period and all payments into the country, an outgrowth of the mercantilist theory of balance of trade.
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 difficulties, and these exceptions are carefully supervised. GATT provided the framework for most important international tariff negotiations from 1947 until 1994. The eighth, or Uruguay round, of GATT negotiations, which began in 1986 with 15 negotiating groups, was long stalemated by the issue of agricultural subsidies maintained by the European Community. The agreement that resulted (1994) from the Uruguay round led to the creation (1995) of the more powerful World Trade OrganizationWorld Trade Organization
(WTO), international organization established in 1995 as a result of the final round of the General Agreement on Tariffs and Trade (GATT) negotiations, called the Uruguay Round.
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 (WTO) as a replacement for GATT. However, the GATT framework remained in place for a 12-month transition period.

General Agreement on Tariffs and Trade

 

a multilateral intergovernmental agreement on the system of trade and trade policy, signed in Geneva in October 1947 by 23 countries. By early 1971 more than 90 countries, including the socialist states of Cuba, Poland, Czechoslovakia, and Yugoslavia, were party to GATT under various conditions. The GATT secretariat is located in Geneva.

GATT includes an agreement on principles of trade policy that the participating countries must observe in foreign trade and an agreed-upon list of mutual concessions. On the basis of this list the contracting parties sign bilateral treaties within the framework of GATT. The aim of the agreement was the renunciation by the contracting parties of quantitative restrictions on import as a means of foreign trade policy. However, the principles of the trade policy laid down in GATT were used by the imperialist countries to a large extent in their own interest. The socialist countries using the GATT mechanism are trying to improve their trade and political positions with respect to the capitalist countries that are party to the agreement. During its existence GATT has lowered customs tariffs in trade between its members. At the same time the agreement has not provided the proclaimed aim of liberalization of foreign trade, in view of contradictions between the major capitalist countries, contradictions that have become especially acute with the setting up of exclusive integrated economic blocs such as the European Economic Community and the European Free Trade Association. Moreover, while advancing demands for trade liberalization, GATT does not make the necessary distinctions between the developed capitalist countries and the developing countries. In demanding from the latter a renunciation of quantitative restrictions on the import of industrial goods, GATT in effect hinders the development of a domestic industry in these countries. At the same time the retention of the restrictions on the imports of agricultural goods and raw materials allowed by GATT slows down the growth of export of the developing countries and adversely affects their economic position.

In 1965 a special committee was set up within the GATT secretariat. Formally this committee was to deal with the problems of the developing countries, but in effect its establishment by the Western powers was intended to reduce the importance of the UN Conference on Trade and Development, which was set up in 1964. Beginning in 1964 the negotiations on mutual tariff concessions, the so-called Kennedy round, were conducted within the framework of GATT. In view of contradictions between the contracting parties these negotiations lasted until 1967. They ended with a series of mutual trade concessions, but the main demands of the developing countries, such as elimination of barriers to export other than tariffs, remained unfulfilled.

V. I. NEZNANOV

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