The General Agreement on Tariffs and Trade (GATT)
Introduction
The General
Agreement on Trade and Tariff (GATT) was set up on October 30, 1947 in Geneva with 23
countries as its founder members, and India was one of them. It was originally set up as a
temporary arrangement to bring about trade liberalisation. India has always been an active
champion of multilateral trade negotiations. GATT later became an important and permanent
set-up to attend to all trade issues among member countries. Its membership also got
enlarged to practically all the members of the United Nations, except the communist
countries and East European countries.
Objectives
of GATT
The broad aim of
GATT has been to reduce the trade restrictions put up by individual nations in pursuit of
their narrow national interests. The goal was to achieve through multilateral
negotiations, settling of all trade disputes through a set of rules and regulations
evolved by GATT for its members.
The other objective
was to aim at tariff concessions for exports and imports among the countries, with a view
to aim at developing the full use of the resources of the world and expanding trade. GATT
always permitted exception to its general rules, which require the eventual elimination of
all import restrictions. It was always subject to safeguards intended to protect
legitimate interests of other trading nations. The most important exceptions given by GATT
were the special protection given to agriculture by most nations and allow many import
restrictions to protect the farmers. Their rules also made import restrictions to protect
the farmers. Their rules also made exceptions in the case of countries, which were in
`balance of payments difficulties.
Work done by
the GATT
From 1947 to 1967,
GATT sponsored six rounds of multilateral trade negotiations mainly with a view to bring
down the trade barriers by persuading countries to bring down their import levies with a
view to greater exchange of goods and more trade flow. The sixth round brought the
weighted average tariff of major trading nations to be reduced by 2% on raw materials and
7.7% on industrial products.
GATT played a
prominent role in the settlement of trade disputes between two countries. GATT played a
useful role between 1947 and 1973. But in the seventies there were many changes, which
occurred in the world economy. The fixed system exchange rate was moving towards a
floating system of exchange parity. The oil prices quadrupled in 1973, and threatened to
increase further. There was a worldwide economic recession in 1974-75. Many of the
developing countries had diversified their export base, and were becoming competitors to
developed countries.
In 1974, the next
round of multilateral negotiations were commenced by GATT, and it was concluded in 1979 at
Tokyo, and was referred to as `Tokyo round of negotiations. Here tariffs were
lowered by 27% to an average level of 5%. Certain non-tariff barrier agreements and codes
were also agreed to.
An eighth round of
trade negotiations under the auspices of GATT was launched in the mid eighties. This was
known as Uruguay Round. Apart from the usual exercise to bring down the trade barriers, it
also attempted to draft trading rules to cover four major sectors, not previously
regulated. These were agriculture, services, investment, and intellectual property rights
(patents, trademarks copyrights etc). It was also decided that an institutional framework
was to be given to GATT, and thus was born World Trade Organisation (WTO which was to
replace GATT as an apex trade policy body.
The discussions,
many times very vociferous, continued for eight long years. Many of the developing
countries put forward their view strongly to protect their economies, and in the
Intellectual Property Rights discussion India played a prominent part and changing many of
the original stringent changeover for the developing countries. It also protected the age
old traditions of the farmers to have the right to their own seed protection and various
other clauses which may have a bearing on our agriculture.
The discussions
dragged on and ultimately a deadline was given that it should be completed at a conference
in Morocco and the new organisation WTO should come into existence on 1st
January 1995. Accordingly all the countries who are members of the GATT signed the WTO
agreement and lodged the instrument of ratification on January 1, 1995. |