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INTRODUCTION TO THEGATT

GATT (General Agreement on Tariffs and Trade):

The General Agreement on Tariffs and Trade (GATT) was originally created by the

Bretton WoodsConference as part of a larger plan for economic recovery after World War

II. The GATTs main purpose was to reduce barriers to international trade. This was

achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on

trade through a series of different agreements. The GATT was an agreement, not an

organization. Originally, the GATT was supposed to become a full international

organization like the World Bank or IMF called the International Trade Organization.

However, the agreement was not ratified, so the GATT remained simply an agreement.

The functions of the GATT have been replaced by the World Trade Organization.

What is the purpose of GATT? According to the Preamble of GATT, the objectives of the

contracting parties include,

raising standards of living

ensuring full employment

thelarge and steadily growing volume of real income and effective demand

developing the full use of the resources of the world

expanding the production and exchange of goods.

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The Preamble also states the contracting parties belief that reciprocal and mutually

advantageous arrangements directed to the substantial reduction in tariffs and other

barriers to trade and to the elimination of discriminatory treatment in international

commerce would contribute toward these goals. Importantly, free trade is not the

stated objective of GATT.

The role of GATT in integrating developing countries into an open multilateral trading

system is also of major consequence. The increasing participation of developing countries

in the GATT tradingsystem and the pragmatic support provided to them through the

flexible application of certain rules helped developing countries to both expand and

diversify their trade. It could now be said that a great number of these countries have

already become full partners in the system as can bewitnessed by their active participation

in the Uruguay Round. The task of helping to integrate further the least-developed

countries is one of the challenges that lies ahead in the WTO. Similarly, the full

integration of countries with economies in transition into the trading system must be

achieved in order to strengthen economic interdependence as a basis for greater prosperity

and world peace.

These negotiations were critical to ensure the future health of the world economy and the

trading system. The globalization of the world economy over the past decade has created

a greater reliance than ever on an open multilateral trading system. Free trade has become

the backbone of economic prosperity and development throughout the world. Partly as a

result of this, there has been a shift in trade policy mechanisms from border measures to

internal policy measures, substantially affecting the management of trade relations.

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The Uruguay Round sought to establish a new balance in rights and obligations among

trading nations as a result of this phenomenon. We are gradually moving towards a global

marketplace, and for that, we need a global system of rules for trade relations among

partners in that market place.

The challenges that we face are therefore enormous. The only way back from this

globalization in theworld economy would be through depression and eventual chaos. We

therefore have no choice but to move forward. In doing so, however, we must be sure to

preserve to the highest extent possible the spirit and tradition of the GATT, which to a

large extent was the key to its success.

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PRINCIPLES OF THE GATT&THE WTO

The ultimate aim of GATT is the establishment of a free multilateral trading system and

liberalization of international trade through removal of discrimination in international

trade and reduction in trade barriers.

For the achievement of this objective, GATT has adopted the following fundamental

principles. These principles forbid unfair trade practice and set a code of conduct for the

participants.

The WTO establishes a framework for trade policies; it does not define or specify

outcomes. That is, it is concerned with setting the rules of the trade policy games. Five

principles are of particular importance in understanding both the pre-1994 GATT and the

WTO:

1. Non-discrimination:

It has two major components: the most favoured nation (MFN) rule, and the

national treatment policy. Both are embedded in the main GATT/WTO rules on

goods, services, and intellectual property, but their precise scope and nature differ

across these areas. The MFN rule requires that a GATT/WTO member must apply

the same conditions on all trade with other GATT/WTO members, i.e. a GATT

member has to grant the most favorable conditions under which it allows trade in

a certain product type to all other GATT/WTO members. National treatment

means that imported goods should be treated no less favorably than domestically

produced goods and was introduced to tackle non-tariff barriers to trade.

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2. Reciprocity:

It reflects both a desire to limit the scope of free-riding that may arise because of

the MFN rule, and a desire to obtain better access to foreign markets. A related

point is that for a nation to negotiate, it is necessary that the gain from doing so be

greater than the gain available from unilateral liberalization; reciprocal

concessions intend to ensure that such gains will materialize.

3. Binding and enforceable commitments:

The tariff commitments made by GATT/WTO members in a multilateral trade

negotiation and on accession are enumerated in a schedule of concessions. These

schedules establish "ceiling bindings": a country can change its bindings, but only

after negotiating with its trading partners, which could mean compensating them

for loss of trade. If satisfaction is not obtained, the complaining country may

invoke the GATT/WTO dispute settlement procedures.

4. Transparency:

The GATT/WTO members are required to publish their trade regulations, to

maintain institutions allowing for the review of administrative decisions affecting

trade, to respond to requests for information by other members, and to notify

changes in trade policies to the GATT/WTO. These internal transparency

requirements are supplemented and facilitated by periodic country-specific

reportsthrough the Trade Policy Review Mechanism (TPRM).The GATT system

tries also to improve predictability and stability, discouraging the use of quotas

and other measures used to set limits on quantities of imports.

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5. Safety valves:

In specific circumstances, governments are able to restrict trade. The GATTs

agreements permit members to take measures to protect not only the environment

but also public health, animal health and plant health.

How do principles works in practice?

Despite high-sounding principles, the WTO Agreements contain an extensive range of

measures that permit members at least to modify, and at times to escape, their obligations.

A full explanation of how these work would require book-length treatment. Here we

provide brief examples of some of the main qualifications, which indicate how a member

government can exercise a degree of sovereignty within the framework of rules

prescribed by the agreements:

1. Grandfathering pre-existing preferences:

This means that if, at the time of signing the agreement, a country gives some

trading partners preferential treatment it can continue to do so.

2. Regional trade agreements:

Countries can be members of regional trade agreements, as well as the WTO even

though there are different obligations. This represents a derogation of the MFN

principle but is allowed under certain conditions.

3. Waivers:

Waivers to obligations are permitted in certain exceptional circumstances. For

instance, the United States received a waiver in the case of the Canada-United

States Automotive Agreement.

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4. Non-application of national treatment:

The national treatment principle does not apply to government procurement or to

the provision of subsidies for domestic production. General Exceptions - General

exceptions are permitted in cases where government measures, although

restrictive of trade, are required for reasons of: public morals; human, animal,

plant life and health; compliance with domestic regulations; trade in gold and

silver; the products of prison labour; conservation of natural resources; protection

of national treasures; and participation in international commodity agreements.

5. National Security:

Actions can be taken to protect national security.

6. Food and human security:

Temporary export prohibitions are permitted in the case of critical shortages of

food and essentials.

7. Balance of payments:

A country can take measures to alleviate a balance of payments problem.

8. Safeguards and countervailing duties:

Allowance is made for safeguards against injury caused to domestic industries by

sudden increases in imports of products. In addition, a country has the ability to

address cases of dumping, and to provide countervailing duties against subsidies.

9. Concessions:

A country has the ability to reduce or withdraw concessions offered.

10. Developing countries:

Special conditions are provided for developing countries.

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OBJECTIVES OF THE GATT&THE WTO

There have been three basic objectives behind the establishment of the GATT.

1. It was to provide a framework for the conduct of trade relations.

2. It was to provide a framework for, and to promote, the progressive elimination

of trade barriers.

3. It was to provide a set of rules that would prevent countries from taking

unilateral action.

These objectives aimed to make the international trade free from all restrictions and to

facilitate the expansion of international trade. Reductions in trade barriers and various

rounds of negotiations have facilitated the expansion of trade. Most Favoured Nations

(MFN) treatment under GATT has also facilitated the expansion of trade.

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THE GATT YEARS

GATT: provisional for almost half a century:

From 1948 to 1994, the General Agreement on Tariffs and Trade (GATT) provided the

rules for much of world trade and presided over periods that saw some of the highest

growth rates in international commerce. It seemed well-established, but throughout those

47 years, it was a provisional agreement and organization.

The original intention was to create a third institution to handle the trade side of

international economic cooperation, joining the two Bretton Woods institutions, the

World Bank and the International Monetary Fund. Over 50 countries participated in

negotiations to create an International Trade Organization (ITO) as a specialized agency

of the United Nations. The aim was to create the ITO at a UN Conference on Trade and

Employment in Havana, Cuba in 1947.

Meanwhile, 15 countries had begun talks in December 1945 to reduce and bind customs

tariffs. With the Second World War only recently ended, they wanted to give an early

boost to trade liberalization, and to begin to correct the legacy of protectionist measures

which remained in place from the early 1930s.

This first round of negotiations resulted in a package of trade rules and 45,000 tariff

concessions affecting $10 billion of trade, about one fifth of the worlds total. The group

had expanded to 23 by the time the deal was signed on 30 October 1947. The tariff

concessions came into effect by 30 June 1948 through a Protocol of Provisional

Application. And so the new General Agreement on Tariffs and Trade was born, with 23

founding members.

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The 23 were also part of the larger group negotiating the ITO Charter. One of the

provisions of GATT says that they should accept some of the trade rules of the draft.

This, they believed, should be done swiftly and provisionally in order to protect the

value of the tariff concessions they had negotiated. They spelt out how they envisaged the

relationship between GATT and the ITO Charter, but they also allowed for the possibility

that the ITO might not be created. They were right.

The Havana conference began on 21 November 1947, less than a month after GATT was

signed. The ITO Charter was finally agreed in Havana in March 1948, but ratification in

some national legislatures proved impossible. In 1950, the United States government

announced that it would not seek Congressional ratification of the Havana Charter, and

the ITO was effectively dead. So, the GATT became the only multilateral instrument

governing international trade from 1948 until the WTO was established in 1995.

For almost half a century, the GATTs basic legal principles remained much as they were

in 1948. There were additions in the form of a section on development added in the 1960s

and pluri-lateral agreements (i.e. with voluntary membership) in the 1970s, and efforts

to reduce tariffs further continued. Much of this was achieved through a series of

multilateral negotiations known as trade rounds the biggest leaps forward in

international trade liberalization have come through these rounds which were held under

GATTs auspices.

In the early years, the GATT trade rounds concentrated on further reducing tariffs. Then,

the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement

and a section on development. The Tokyo Round during the seventies was the first major

attempt to tackle trade barriers that do not take the form of tariffs, and to improve the

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system. The eighth, the Uruguay Round of 1986-94, was the last and most extensive of

all. It led to the WTO and a new set of agreements.

The Tokyo Round: a first try to reform the system:

The Tokyo Round lasted from 1973 to 1979, with 102 countries participating. It

continued GATTs efforts to progressively reduce tariffs. The results included an average

one-third cut in customs duties in the worlds nine major industrial markets, bringing the

average tariff on industrial products down to 4.7%. The tariff reductions, phased in over a

period of eight years, involved an element of harmonization the higher the tariff, the

larger the cut, proportionally.

In other issues, the Tokyo Round had mixed results. It failed to come to grips with the

fundamental problems affecting farm trade and also stopped short of providing a modified

agreement on safeguards (emergency import measures). Nevertheless, a series of

agreements on non-tariff barriers did emerge from the negotiations, in some cases

interpreting existing GATT rules, in others breaking entirely new ground. In most cases,

only a relatively small number of (mainly industrialized) GATT members subscribed to

these agreements and arrangements. Because they were not accepted by the full GATT

membership, they were often informally called codes.

They were not multilateral, but they were a beginning. Several codes were eventually

amended in the Uruguay Round and turned into multilateral commitments accepted by all

WTO members. Only four remained plurilateral those on government procurement,

bovine meat, civil aircraft and dairy products. In 1997 WTO members agreed to terminate

the bovine meat and dairy agreements, leaving only two.

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SUCCESS & FAILURE OF THE GATT

SUCCESS:

One of the important achievements of GATT was the establishment of a forum for

continuing consultations. Disputes that might otherwise have caused continuing hard

feeling, reprisals, and even diplomatic rupture, have been brought to the conference table

and compromised. GATT could achieve considerable trade liberalization.

Over the 47 years GATT was successful in promoting and securing liberalization of

world trade. Continued reductions in tariffs alone helped to achieve very high rates of

world trade growth during the 1950s and 1960s around 8 percent a year on an average.

The momentum of trade liberalization helped to ensure that trade growth consistently out-

paced production growth throughout the GATT era, a measure of countries increasing

ability to trade with each other and to reap the benefits of trade.

The rush of new members during the Uraguay Round demonstrated that the multilateral

trading system was recognized as an anchor for development and an instrument of

economic and trade reform.

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FAILURE:

As time passed new problems arose. The Tokyo Round in the 1970s was an attempt to

tackle some of these but its achievements were limited. This was a sign of difficult

times to come.

GATTs success in reducing tariffs to such a low level, combined with a series of

economic recessions in the 1970s and early 1980s, drove governments to devise other

forms of protection for sectors facing increased foreign competition. High rates of

unemployment and constant factory closures led governments in Western Europe and

North America to seek bilateral market-sharing arrangements with competitors and to

embark on a subsidies race to maintain their holds on agricultural trade. Both these

changes undermined GATTs credibility and effectiveness.

The problem was not just a deteriorating trade policy environment. By the early 1980s

the General Agreement was clearly no longer as relevant to the realities of world trade

as it had been in the 1940s. The expansion of services trade was also closely tied to

further increases in world merchandise trade. In other respects, GATT had been found

wanting. For instance, in agriculture, loopholes in the multilateral system were

heavily exploited, and efforts at liberalizing agricultural trade met with little success.

In the textiles and clothing sector, an exception to GATTs normal disciplines was

negotiated in the 1960s and early 1970s, leading to the Multifibre Arrangement. Even

GATTs institutional structure and its dispute settlement system were causing

concern.These and other factors convinced GATT members that a new effort to

reinforce and extend the multilateral system should be attempted. That effort resulted

in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.

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INTRODUCTION TO THE WTO

The World Trade Organization (WTO) is an organization that intends to supervise and

liberalizeinternational trade. The organization officially commenced on January 1, 1995

under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade

(GATT), which commenced in 1948. The organization deals with regulation of trade

between participating countries; it provides a framework for negotiating and formalizing

trade agreements, and a dispute resolution process aimed at enforcing participants'

adherence to WTO agreements which are signed by representatives of member

governments and ratified by their parliaments. Most of the issues that the WTO focuses

on derive from previous trade negotiations.

The WTO began life on 1 January 1995, but its trading system is half a century older.

Since 1948, the General Agreement on Tariffs and Trade (GATT) had provided the rules

for the system. WTO's current Director-General is Pascal Lamy, who leads a staff of over

600 people in Geneva, Switzerland.

The WTO was born out of negotiations, and everything the WTO does is the result of

negotiations. The bulk of the WTOs current work comes from the 198694 negotiations

called the Uruguay Round and earlier negotiations under the General Agreement on

Tariffs and Trade (GATT). The WTO is currently the host to new negotiations, under the

Doha Development Agenda launched in 2001.

Where countries have faced trade barriers and wanted them lowered, the negotiations

have helped to open markets for trade. But the WTO is not just about opening markets,

and in some circumstances its rules support maintaining trade barriers for example, to

protect consumers or prevent the spread of disease.

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At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds

trading nations. These documents provide the legal ground rules for international

commerce. They are essentially contracts, binding governments to keep their trade

policies within agreed limits. Although negotiated and signed by governments, the goal is

to help producers of goods and services, exporters, and importers conduct their business,

while allowing governments to meet social and environmental objectives.

The systems overriding purpose is to help trade flow as freely as possible so long as

there are no undesirable side effects because this is important for economic

development and well-being. That partly means removing obstacles. It also means

ensuring that individuals, companies and governments know what the trade rules are

around the world, and giving them the confidence that there will be no sudden changes of

policy. In other words, the rules have to be transparent and predictable.

Trade relations often involve conflicting interests. Agreements, including those

painstakingly negotiated in the WTO system, often need interpreting. The most

harmonious way to settle these differences is through some neutral procedure based on an

agreed legal foundation. That is the purpose behind the dispute settlement process written

into the WTO agreements.

What is the World Trade Organization?

The World Trade Organization (WTO) deals with the rules of trade between nations at a

global or near-global level. But there is more to it than that.

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Is it a bird, is it a plane?

There are a number of ways of looking at the WTO. Its an organization for liberalizing

trade. Its a forum for governments to negotiate trade agreements. Its a place for them to

settle trade disputes. It operates a system of trade rules.

Its a negotiating forum:

Essentially, the WTO is a place where member governments go, to try to sort out the

trade problems they face with each other. The first step is to talk. The WTO was born out

of negotiations, and everything the WTO does is the result of negotiations. The bulk of

the WTO's current work comes from the 1986-94 negotiations called the Uruguay Round

and earlier negotiations under the General Agreement on Tariffs and Trade (GATT). The

WTO is currently the host to new negotiations, under the Doha Development Agenda

launched in 2001.

Where countries have faced trade barriers and wanted them lowered, the negotiations

have helped to liberalize trade. But the WTO is not just about liberalizing trade, and in

some circumstances its rules support maintaining trade barriers for example to protect

consumers or prevent the spread of disease.

Its a set of rules:

At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds

trading nations. These documents provide the legal ground-rules for international

commerce. They are essentially contracts, binding governments to keep their trade

policies within agreed limits. Although negotiated and signed by governments, the goal is

to help producers of goods and services, exporters, and importers conduct their business,

while allowing governments to meet social and environmental objectives.

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The systems overriding purpose is to help trade flow as freely as possible so long as

there are no undesirable side-effects because this is important for economic

development and well-being. That partly means removing obstacles. It also means

ensuring that individuals, companies and governments know what the trade rules are

around the world, and giving them the confidence that there will be no sudden changes of

policy. In other words, the rules have to be transparent and predictable.

It helps to settle disputes:

This is a third important side to the WTOs work. Trade relations often involve

conflicting interests. Agreements, including those painstakingly negotiated in the WTO

system, often need interpreting. The most harmonious way to settle these differences is

through some neutral procedure based on an agreed legal foundation. That is the purpose

behind the dispute settlement process written into the WTO agreements.

The organization is attempting to complete negotiations on the Doha Development

Round, which was launched in 2001 with an explicit focus on addressing the needs of

developing countries. As of June 2012, the future of the Doha Round remains uncertain:

The work programme lists 21 subjects in which the original deadline of 1 January 2005

was missed. The further imposition of free trade on industrial goods and services and the

protectionism on farm subsidies to domestic agricultural sector requested from the

developed countries, and the substantiation of the international liberalization of fair trade

on agricultural products from developing countries remain the major obstacles. These

points of contention have hindered any progress to launch new WTO negotiation(s)

beyond the Doha Development Round. As a result of this impasse, there has been an

increasing amount of bilateral free trade agreements.

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HISTORY

1947 October - 23 countries sign the General Agreement on Tariffs and Trade (Gatt) in

Geneva, Switzerland, to try to give an early boost to trade liberalisation.

1947 November - Delegates from 56 countries meet in Havana, Cuba, to start negotiating

the charter of a proposed International Trade Organisation.

1948 1 January - Gatt agreement comes into force.

1948 March - Charter of International Trade Organisation signed but US Congress rejects

it, leaving Gatt as the only international instrument governing world trade.

1949 - Second Gatt round of trade talks held at Annecy, France, where countries

exchanged some 5,000 tariff concessions.

1950 - Third Gatt round held in Torquay, England, where countries exchanged some

8,700 tariff concessions, cutting the 1948 tariff levels by 25%.

1955-56 - The next trade round completed in May 1956, resulting in $2.5bn in tariff

reductions.

1960-62 - Fifth Gatt round named in honour of US Under Secretary of State Douglas

Dillon who proposed the negotiations. It yielded tariff concessions worth $4.9bn of world

trade and involved negotiations related to the creation of the European Economic

Community.

1964-67 - The Kennedy Round, named in honour of the late US president, achieves tariff

cuts worth $40bn of world trade.

1973-79 - The seventh round, launched in Tokyo, Japan, sees Gatt reach agreement to

start reducing not only tariffs but trade barriers as well, such as subsidies and import

licensing. Tariff reductions worth more than $300bn dollars achieved.

1986-93 - Gatt trade ministers launch the Uruguay Round in Punta Del Este, Uruguay,

embarking on the most ambitious and far-reaching trade round so far. The round extended

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the range of trade negotiations, leading to major reductions in agricultural subsidies, an

agreement to allow full access for textiles and clothing from developing countries, and an

extension of intellectual property rights.

1994 - Trade ministers meet for the final time under GATT auspices at Marrakesh,

Morocco to establish the World Trade Organization (WTO) and complete the Uruguay

Round.

1995 - The World Trade Organization is created in Geneva.

1999 - At least 30,000 protesters disrupt WTO summit in Seattle, US; New Zealander

Mike Moore becomes WTO director-general.

2001 November - WTO members meeting in Doha, Qatar, agree on the Doha

Development Agenda, the nineth trade round which is intended to open negotiations on

opening markets to agricultural, manufactured goods, and services.

2002 August - WTO rules in favour of the EU in its row with Washington over tax breaks

for US exporters. The EU gets the go-ahead to impose $4bn in sanctions against the US,

the highest damages ever awarded by the WTO.

2003 September - WTO announces deal aimed at giving developing countries access to

cheap medicines, hailing it as historic. Aid agencies express disappointment at the deal.

2004 August - Geneva talks achieve framework agreement on opening up global trade.

US and EU will reduce agricultural subsidies, while developing nations will cut tariffs on

manufactured goods.

2005 September - Frenchman Pascal Lamy takes over as WTO director-general. He was

formerly the EU's trade commissioner.

2007 December - WTO clears way for Cape Verde's membership by approving a package

of agreements which spell out the terms ofit's accession. Cape Verde is expected to ratify

the deal by June 2008.

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2008 July - Ministerial talks aimed at resuscitating the Doha Round of talks break down

on ninth day of meeting after the US and India fail to find a compromise on measures

intended to help poor countries protect their farmers against import surges.

2009 March - WTO says global trade flows are set to shrink by 9% during 2009. Hardest

hit will be developed nations, where trade is set to fall 10%. Poorer countries will see

exports fall by 2-3%.

2010 March - Pascal Lamy predicts that the worst of global trade recession is over and

WTO economists foresee 2010 world economic growth of 9.5%.

2010 December - The European Union expresses support for Russia's.

bid to join the WTO after Moscow agreed to cut timber export tariffs and rail freight fees.

Russia is the only major economy outside the WTO.

China says it plans to appeal against a WTO ruling that the US was entitled to impose

extra duties on Chinese tyre imports..

2011 July - WTO upholds complaints by the US, European Union and Mexico that China

had broken global free trade rules by imposing quotas and taxes on exports of certain key

materials, including minerals like bauxite, magnesium and zinc. China complains.

2011 December - Russia finally joins the WTO after 18 years negotiating its membership.

Switzerland brokered a deal to persuade Georgia to lift its veto, which it had imposed

after the 2008 Russo-Georgian war.

WTO agrees terms for Samoa and Montenegro to join in 2012.

2012 January - The WTO rejects China's appeal against a ruling that it broke free trade

rules by imposing quotas and taxes on exports of key materials.

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FUNCTIONS OF THE WTO

Among the various functions of the WTO, these are regarded by analysts as the most

important:

It oversees the implementation, administration and operation of the covered

agreements.

It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies, and

to ensure the coherence and transparency of trade policies through surveillance in global

economic policy-making. Another priority of the WTO is the assistance of developing,

least-developed and low-income countries in transition to adjust to WTO rules and

disciplines through technical cooperation and training.

The WTO is also a center of economic research and analysis: regular assessments of the

global trade picture in its annual publications and research reports on specific topics are

produced by the organization.

Finally, the WTO cooperates closely with the two other components of the Bretton

Woods system, the IMF and the World Bank.

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ORGANIZATIONAL STRUCTURE

The General Council has the following subsidiary bodies which oversee committees in

different areas:

Council for Trade in Goods

There are 11 committees under the jurisdiction of the Goods Council each with a specific

task. All members of the WTO participate in the committees. The Textiles Monitoring

Body is separate from the other committees but still under the jurisdiction of Goods

Council. The body has its own chairman and only 10 members. The body also has several

groups relating to textiles.

Council for Trade-Related Aspects of Intellectual Property Rights

Information on intellectual property in the WTO, news and official records of the

activities of the TRIPS Council, and details of the WTO's work with other international

organizations in the field.

Council for Trade in Services

The Council for Trade in Services operates under the guidance of the General Council

and is responsible for overseeing the functioning of the General Agreement on Trade in

Services (GATS). It is open to all WTO members, and can create subsidiary bodies as

required.

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Trade Negotiations Committee

The Trade Negotiations Committee (TNC) is the committee that deals with the current

trade talks round. The chair is WTO's director-general. As of June 2012 the committee

was tasked with the Doha Development Round.

The Service Council has three subsidiary bodies: financial services, domestic regulations,

GATS rules and specific commitments. The General council has several different

committees, working groups, and working parties. There are committees on the

following: Trade and Environment; Trade and Development (Subcommittee on Least-

Developed Countries); Regional Trade Agreements; Balance of Payments Restrictions;

and Budget, Finance and Administration. There are working parties on the following:

Accession. There are working groups on the following: Trade, debt and finance; and

Trade and technology transfer.

Decision-making

The WTO describes itself as "a rules-based, member-driven organization all decisions

are made by the member governments, and the rules are the outcome of negotiations

among members". The WTO Agreement foresees votes where consensus cannot be

reached, but the practice of consensus dominates the process of decision-making.

Richard Harold Steinberg (2002) argues that although the WTO's consensus governance

model provides law-based initial bargaining, trading rounds close through power-based

bargaining favoring Europe and the U.S., and may not lead to Pareto improvement.

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DISPUTE SETTLEMENT

In 1994, the WTO members agreed on the Understanding on Rules and Procedures

Governing the Settlement of Disputes (DSU) annexed to the "Final Act" signed in

Marrakesh in 1994. Dispute settlement is regarded by the WTO as the central pillar of the

multilateral trading system, and as a "unique contribution to the stability of the global

economy". WTO members have agreed that, if they believe fellow-members are violating

trade rules, they will use the multilateral system of settling disputes instead of taking

action unilaterally. The operation of the WTO dispute settlement process involves the

DSB panels, the Appellate Body, the WTO Secretariat, arbitrators, independent experts

and several specialized institutions. Bodies involved in the dispute settlement process,

World Trade Organization.

The WTO Dispute Settlement Understanding (DSU):

Legal approach: rule orientation, or conciliation and negotiation:

According to lawyers, the dispute settlement serves the purpose of clarifying the

interpretation of the rule, its scope, and appropriate exceptions. The issues then are

whether the dispute settlement is oriented towards conciliation and negotiation or more

towards rule integrity, and more importantly whether it should be oriented towards one

or the other approach. This issue is related to the distinction between two techniques of

modern diplomacy: a rule oriented technique and a power oriented technique.

Under a rule oriented technique, international disputes are settled with reference to

norms or rules to which both parties have previously agreed. The parties need to

understand that an unsettled dispute would ultimately be resolved by impartial third-party

judgments based on the rules.

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Under a power oriented technique disputes are settled with explicit or implicit reference

to relative power status of the parties. Threats will be a major part of the technique

employed.

The history of the dispute settlement under GATT does not give a clear answer to the

question whether the dispute settlement is oriented towards conciliation or rule

integrity. On the one hand, many specialists and diplomats see the GATT/WTO mainly

as a negotiating forum. On the other hand, there are signs, such as for instance the shift

from a working party to a panel procedure that the practice evolved in the direction

of rule integrity.

The appellate panel reports seem to strongly reinforce the rule orientation of the

system.

The procedure:

The Dispute Settlement Body (DSB), which comprises all WTO members, has the

authority to establish panels, adopt panel and Appellate Body reports, maintain

surveillance of the implementation of rulings and recommendations, and authorize

suspension of concessions and other obligations under WTO agreements. If a member

considers that abenefit accruing to it directly or indirectly under the WTO agreements is

being nullified or impaired, it must first request bilateral consultations. If consultations

fail to settle the dispute, the complaining party may request the establishment of a panel,

which must be created unless the DSB decides by consensus not to do so.

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A panel is generally composed of three panelists and its deliberations are confidential.

Panels must conduct examinations within six months. Within 60 days of the date of

circulation of a panel report to WTO members, the report must be adopted at a DSB

meeting unless a party to the dispute formally notifies the DSB of its decision to appeal or

the DSB decides by consensus not to adopt the report. The Appellate Body, a standing

tribunal created in the Uruguay Round, considers any appeals. The tribunal consists of

seven members, of whom three serve on any given case. Appellate Bodyproceedings are

not to exceed 60 days and are confidential. When a panel or the Appellate Body

concludes that a measure is inconsistent with a covered agreement, it must recommend

that the member concerned bring its measures into conformity with the WTO agreement.

The last recourse for countries in enforcing compliance with DSB recommendations and

rulings is the suspension of concessions.

Developing countries and the DSU:

A number of provisions in the DSU relate to developing countries. Most of those however

have proved to be more declarative than operative.

More generally, it has been argued that it is a waste of time and money for developing

countries to invoke the WTOs dispute settlement procedure against industrial countries.

Even if, the argument runs, a developing country obtains a clear legal ruling that an

industrial country has violated its legal obligations; the developing country has no

effective way to enforce the ruling. The only enforcement sanction provided by the WTO

dispute settlement procedure is trade retaliation the imposition of discriminatory trade

sanctions by the complaining country against the trade of the defendant country. And

trade retaliation bysmaller developing countries, it is argued, simply doesnot inflict any

significant harm on larger industrial countries.

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In the end, the argument concludes, retaliation will harm the developing country imposing

it far more than it will harm the industrial country it is supposed to punish. On the

contrary, industrial countries are in a better position both because they can afford to take

countermeasures and because they can incur the costs of action being taken against them.

While there is no doubt that the procedure is onesided, this does not necessarily mean that

legal complaints by developing countries that is legal complaints without the retaliation

option cannot be a useful and effective policy tool. Hudec (2002) for instance, argues

that the enforcement of international obligations cannot be explained by superficial

analysis of dispute settlement procedures and remedies.

According to him, the compliance decisions of governments are determined more by

calculated self-interest than by force. In his view, three factors influence the decision of

governments to comply or not. First, in principle, at least some of the political

constituencies in the defendant country are likely to consider that the measures imposed

by compliance are good policy. Second, some interest groups in the defendant country

should perceive a value in the legal system itself. Third, the influence of active pressure

by other governments should not be underestimated.

Hudecs two main conclusions are thus that a legal ruling without retaliation can still be

an effective policy tool for a developing country seeking to reverse a legal violation by a

larger country and that developing countries should not expect too much from a more

effective retaliation mechanism, which would not bring about a decisive change in the

political fundamentals of WTO enforcement.

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Participation in the dispute settlement mechanism:

After a few years of operation under the DSU, there seems to be widespread opinion that

the WTO Dispute Settlement procedures are quite successful. The number of cases

brought to the WTO dispute settlement system per annum is significantly higher than the

number of disputes brought to the GATT. In the post-Tokyo Round period (1980-94) an

average of 5 disputes were initiated every year. This compares to an average number of

disputes per year of more than 36 in the period 1995 to 2002. A cursory look at which

countries have been involved in the dispute settlement procedure as either complainant or

respondent shows that developed countries have been much more involved than

developing countries. This should notcome as a surprise if one admits that the number of

disputes should be proportional to Members share of world trade. The share of developed

countries in world trade is still much larger than the share of developing countries.

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ACCESSION & MEMBERSHIP

The process of becoming a WTO member is unique to each applicant country, and the

terms of accession are dependent upon the country's stage of economic development and

current trade regime. The process takes about five years, on average, but it can last more

if the country is less than fully committed to the process or if political issues interfere.

The shortest accession negotiation was that of the Kyrgyz Republic, while the longest was

that of Russia, which, having first applied to join GATT in 1993, was approved for

membership in December 2011 and became a WTO member on August 22, 2012.

The second longest was that of Vanuatu, whose Working Party on the Accession of

Vanuatu was established on 11 July 1995. After a final meeting of the Working Party in

October 2001, Vanuatu requested more time to consider its accession terms.

In 2008, it indicated its interest to resume and conclude its WTO accession. The Working

Party on the Accession of Vanuatu was reconvened informally on 4 April 2011 to discuss

Vanuatus future WTO membership. The re-convened Working Party completed its

mandate on 2 May 2011. The General Council formally approved the Accession Package

of Vanuatu on 26 October 2011.

On 24 August 2012, the WTO welcomed Vanuatu as its 157th member. An offer of

accession is only given once consensus is reached among interested parties.

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ACCESSION PROCESS

A country wishing to accede to the WTO submits an application to the General Council,

and has to describe all aspects of its trade and economic policies that have a bearing on

WTO agreements. The application is submitted to the WTO in a memorandum which is

examined by a working party open to all interested WTO Members.

After all necessary background information has been acquired, the working party focuses

on issues of discrepancy between the WTO rules and the applicant's international and

domestic trade policies and laws. The working party determines the terms and conditions

of entry into the WTO for the applicant nation, and may consider transitional periods to

allow countries some leeway in complying with the WTO rules.

The final phase of accession involves bilateral negotiations between the applicant nation

and other working party members regarding the concessions and commitments on tariff

levels and market access for goods and services. The new member's commitments are to

apply equally to all WTO members under normal non-discrimination rules, even though

they are negotiated bilaterally.

When the bilateral talks conclude, the working party sends to the general council or

ministerial conference an accession package, which includes a summary of all the

working party meetings, the Protocol of Accession (a draft membership treaty), and lists

("schedules") of the member-to-be's commitments. Once the general council or

ministerial conference approves of the terms of accession, the applicant's parliament must

ratify the Protocol of Accession before it can become a member.

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MEMBERS & OBSERVERS

The WTO has 157 members and 27 observer governments.[58]

In addition to states, the

European Union is a member. WTO members do not have to be full sovereign nation-

members. Instead, they must be a customs territory with full autonomy in the conduct of

their external commercial relations. Thus Hong Kong (as "Hong Kong, China" since

1997) became a GATT contracting party, and the Republic of China (Taiwan) acceded to

the WTO in 2002 as "Separate Customs Territory of Taiwan, Penghu, Kinmen and

Matsu" (Chinese Taipei) despite its disputed status. The WTO Secretariat omits the

official titles (such as Counselor, First Secretary, Second Secretary and Third Secretary)

of the members of Chinese Taipei's Permanent Mission to the WTO, except for the titles

of the Permanent Representative and the Deputy Permanent Representative.

Iran is the biggest economy outside the WTO. With the exception of the Holy See,

observers must start accession negotiations within five years of becoming observers. A

number of international intergovernmental organizations have also been granted observer

status to WTO bodies. 14 states and two territories so far have no official interaction with

the WTO.

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DIFFERENCE BETWEEN THE GATT &THE WTO

Is the WTO the same as the GATT?

The short answer is no. The WTO is the GATT plus a lot more, but before we describe

the WTO since 1995, it is useful to summarize what happened between 1947 and the start

of negotiations in 1986 leading to the WTO. There have been eight rounds of trade

negotiations since 1947. The first five rounds were of relatively short duration and dealt

mainly with tariff reductions. The sixth, the Kennedy Round (1963-67), achieved deeper

and wider tariff cuts, especially in industrial tariffs, and brought developing country

concerns to the fore. The seventh, the Tokyo Round, which lasted six years (1973 - 1979),

cut tariffs substantially but also introduced a series of codes on non-tariff barriers (NTBs).

These codes were only binding on the countries that signed them and were criticized by

some as being GATT -la carte.

The WTO was the result of the eighth round of negotiations, known as the Uruguay

Round (1986-93). It was named for the country, which held the conference (at Punta del

Este) leading to the decision to proceed. By the 1980s, a number of problems with

the world trading system needed to be addressed: certain areas such as agriculture were

exempt from GATT rules or were managed under separate agreements such as textiles;

trade in services and intellectual property were largely outside the agreement; NTBs and

new forms of protectionismwere proliferating; and membership had grown toover 90

countries requiring the organization to bereformed.

The Uruguay Round was a complex set of negotiations undertaken to address the

prevailing inadequacies of the GATT. The negotiations almost floundered on several

occasions.

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The GATT Secretariat prepared an ambitious draft text in December 1991, but only after

a breakthrough on agricultural issues between the United States and the European

Community did a final agreement emerge in December 1993. In April

1994, in Marrakesh, representatives of 111 GATT member countries signed the Final Act

incorporating the agreements. The Final Act was about one page long; the main text

including the agreements and annexes about 430 pages long; and there were about 25,000

pages containing the schedules of commitments made by each member country. The Final

Act took effect in January 1995 when the WTO was launched.

The WTO club now has more members (148 at the time of writing), has rules covering

more activities, and has a more effective means to resolve disputes between the members.

The main differences between the GATT and the WTO are described by the WTO as

follows:

1. The GATT was provisional. Its contracting parties never ratified the General

Agreement, and it contained no provisions for the creation of an organization.

2. The WTO and its agreements are permanent. As an international organization, the

WTO has a sound legal basis because all members have ratified the WTO

Agreements, and the agreements themselves describe how the WTO is to function.

3. The WTO has members. GATT had contracting parties, underscoring the fact

that officially the GATT was a legal text.

4. The GATT dealt with trade in goods. The WTO deals with trade in services and

intellectual property as well.

5. The WTO dispute settlement system is faster and more automatic than the old

GATT system. Its rulings cannot be blocked.

6. The WTO has introduced a trade policy review mechanism that increases the

transparency of members trade policies and practices.

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THE WTO SECRETARIAT AND BUDGET

A Secretariat of about 500 persons headed by a Director General provides technical

support for thevarious councils, committees and conferences as well as technical

assistance to developing countries. It also analyzes world trade and explains the workings

of the WTO to the public and the media. The Secretariat provides some forms of legal

assistance in the dispute settlement process and advises governments applying to become

members of the WTO.

In order to interact with this process, which is observed by analysts to be increasingly

legalistic especially in terms of handling disputes, membercountries need to have

representatives in Geneva as well as persons at home in their trade or foreign ministry

that can deal with the issues. This is an increasing burden on smaller and especially

developing countries. Effectively it means that some member countries may be

disadvantaged relative to others.

The annual budget of the WTO Secretariat is around 160 million Swiss francs (US$135

million). This comes from individual contributions from the members calculated on the

basis of their share of global trade.

The largest single contributor is the United States, atabout US$21.5 million per year,

though the EU countries together contribute nearly US$57 million.

The WTO budget also supports the International Trade Centre, a capacity-building

organization jointlysupported by the WTO and the United Nations Conference on Trade

and Development, and members make special contributions for technical assistance.

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HOW DO WTO RULES AFFECT OUR LIVES?

Since its creation in 1995, the WTO has become a major influence in the lives of the

worlds citizens. Using both the fundamental rules of most WTO-enforced agreements

combined with WTO enforcement mechanisms; the major power blocks and their big

business sectors are forcing many countries to weaken their regulatory frameworks in

several important areas.

Economic insecurity:

The WTO was not designed to produce jobs. It has rules and regulations that limit a

governments ability to create jobs. For example, look at the WTOs Trade

Related Investment Measures (TRIMS). Under these measures, governments cannot

require a transnational corporation to meet job creation targets. Governments cannot

demand that the transnationals balance their imports with exports to maintain a level of

job security. For the most part, WTO rules favour the interests of foreign-based

corporations over domestic companies. While transnational corporations certainly create

jobs, they are not the major source of employment. The largest 200 corporations in the

world have more economic clout than 4/5th of humanity; yet employ a tiny percentage of

all workers. The gap between the rich and poor is staggering.

According to the 2000 United Nations Development Report, there is a difference of 150

to 1 between the income levels of the top 20 per cent and bottom 20 percent of the

worlds population. That represents a doubling in the last 30 years. The 225 richest people

in the world now have a combined wealth equal to the annual income of half of the

worlds population. The three richest people have more assets than the combined gross

domestic product of 48 countries.

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By promoting free trade rather than fair trade, the WTO rules contribute to these gross

economicdifferences. The prices paid to most Third Worldcountries for their exports have

declined steadily over the past 10 years. But the cost of imports to these countries has

gone up considerably. Industrialized countries too have not lived up to their commitments

to open markets for exports from the Third World. About $100 billion USD are lost every

year by goods exporting countries in the South because they cannot get access to markets

in the North.

If global trade is going to increase economic security, then a fair trade agenda must

replace the WTO rules.

Political insecurity:

Why do governments often seem powerless in the faceof globalization? Why do people

feel they have little or not control over their economic , social, or ecological

future? A big part of the reason lies in the WTO and its trade rules.

The WTO is much more than a global trade body. It makes the rules that control the

global economy. The WTO rules amount to a bill of rights and freedomsfor transnational

corporations.Under these rules, governments must provide a safe haven for transnational

investment and trade in their countries.

Through the WTO, transnational corporations are given virtually free reign to operate

within the trade organizations 148 member countries. Equipped with WTO power tools

like National Treatment rules and Most Favoured Nation status, these corporations

can move their operations from one country or region to another. They can take

advantage of more profitable investment opportunities, without being restricted by

government intervention or regulation.

Whats more, the WTOs mechanism for settlingdisputes gives the organization

incredible power to enforce trade rules. The WTO can strike down laws,policies and

programs of democratically electedlegislatures including economic, healt, social and

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environmental laws. All it takes is a panel ofunelected trade experts to say that a country

is violating the WTO trade rules.If a country refuses tochange its laws, it could face

economic penalties thatget bigger and bigger. No other global institution hassuch powers.

The WTO is a serious threat to thepolitical security of citizens and governments

indemocratic societies.

If we want global trade to provide conditions for political security through democratic

control, then a fair trade agenda must replace the WTO rules.

Social insecurity:

Why is our social security rapidly disappearing through the privatization of basic public

services and social rights? A major reason liesin the GATS rules of the WTO.

The General Agreement on Trade in Services (GATS) gives transnational corporations

the power tools toopen up markets. These tools are largely aimed at deregulating

and privatizing public services.The GATS rules apply to all the ways of supplying and

delivering services. This includes foreign investment, crossborderdelivery, electronic

commerce and international travel. The GATS rules include a set of legal limits on what

governments can do to restrict the private sector. No other trade regime has reached so far

into the policy jurisdiction of governments.

Negotiations are now taking place at the WTO to expand the GATS to include public

services like health care, education, social assistance, transportation, postal, drinking

water and a variety of municipal services.

Trade-in-services is the fastest growing sector of the global economy. No wonder, there is

a lot of money to be made in privatizing public services. Health care is already a $3.5

trillion annual market worldwide.Education is pegged at $2 trillion and water at $1trillion.

The CEO of the worlds largest for-profit hospitalcorporation (Columbia/ HCA) insists

that health care is no different than the airline or ball bearing industry.

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He vows to destroy every public hospital in North America. Investment houses like Merill

Lynch predict that public education will be privatized the world over during the next

decade. Water service corporations like Vivendi and Suez of France are moving

aggressively to privatize water in the U.S. and Canada. At the same time, they are

working hand-in-glove with the World Bank to force developing states to do the same.

This is nothing new for most peoples in the Third World. There the structural adjustment

programs of the IMF and World Bank have already stripped the poor majority of their

basic social rights. The GATS will simply reinforce the effects of these programs.

If global trade is going to provide conditions for strengthening peoples social security,

then a fair trade agenda must replace the GATS rules on public services.

Ecological insecurity:

Why are so many people feeling anxious about their ecological future? Why do climate

change, global warming and the fear that not enough is being done to ensure the survival

of the planet trouble people? Part of the reason lies in the WTO and its trade rules.

The WTO rules do not protect the environment. Under Article XX of the General

Agreement on Trade and Tariffs (GATT), member countries can adopt laws necessary to

protect human, animal or plant life or health. relating to the conservation of exhaustible

natural resources... But the WTO rules also make it clear that environmental protections

cannot be applied in a way that discriminates against transnational corporations. Nor can

governments legislateenvironmental regulations that the WTO says are a disguised barrier

to trade.

In disputes brought before the WTO, business rights have been consistently upheld over

environmentalrights.Also the WTO rules trump all internationalenvironment standards in

favour of the global economy.

For example, the WTO rules do not recognize then authority of the Multilateral

Agreements on the Environment. They also threaten to undercut agreements such as the

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International Convention on Endangered Species of Fauna and Flora. The WTO rules are

also a threat to the Earths biodiversity.

Under the WTO rules on Trade Related Intellectual Property Rights, transnational

corporations can claim ownership by taking out patents. Now pharmaceutical and agro-

chemical corporations want to revise these rules at the WTO. They want to allow the

patenting of life forms, including medicinal plants.

Peace insecurity:

Why did the global arms race continue after the collapse of the Berlin Wall and the end of

the Cold War in 1989? One of the reasons is that the WTO encourages militarism and the

arms race.

According to the WTO, it looks like governments have one legitimate role. That role is to

provide a military infrastructure to protect their countries and a police force to ensure

civil order. The only areas of government activity not covered by WTO trade rules are

military operations and police enforcement. The right of individual governments to

control these areas is provided under the WTOs so-called security exception clause

(Article XXI of the General Agreement on Trade and Tariffs).

The security exception clause gives governments the freedom to take any actions deemed

necessary to protect their national security interests. These includeactions relating to the

traffic in arms, ammunitionand implements of war and such traffic in other goodsand

materials as is carried on directly for the purposeof supplying a military establishment

[or] taken intime of war or other emergency in internationalrelations.

Under the protection of this WTO clause, massive government subsidies fuel the arms

industry and military build-up in Third World countries. In the U.S., much of the annual

$309 billion military budget subsidizes corporate players like Lockheed Martin, Boeing,

BAe Systems, Raytheon, Thomson-CSF, and Daimler-Chrysler. These corporations form

the backbone of the military-industrial complex.

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If we want global trade to establish conditions for peace security, then a fair trade agenda

must replace the WTO rules.

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ARTICLE

GATT TURNS 60

Sixty years ago this week (April 10, 1947) at the Palais des Nations in Geneva,

Switzerland, representatives from 23 nations opened a conference that attracted little

attention at the time, but had far-reaching consequences for the world economy. The

conferees met to negotiate tariff reductions and finalize the text of a General

Agreement on Tariffs and Trade (GATT). They sought to create an open world trading

system, one in which trade would flow relatively freely between countries with the

understanding that new trade barriers would not be erected to impede this flow. In the

60 years since then, world trade and prosperity have flourished to a degree well

beyond the hopes of the founders of the GATT, a result that can be attributed in part to

their sage actions half a century ago.

The origins of the GATT can be found in the economic disaster of the interwar period.

After World War I, the United States turned its back on the League of Nations and

international economic cooperation. World leaders failed to put the world trade and

payments system, which had been severely disrupted by the war, on a functional basis

after the war.

On top of this came the Great Depression, and with it a dramatic contraction of world

trade. The U.S. imposed the protectionist Smoot-Hawley tariff in 1930. Two years

later, Britain abandoned its traditional free trade policy by imposing a General Tariff

and signing the Ottawa agreements with its former colonies, creating a preferential

trading bloc that discriminated against nonmembers. Germany strong-armed countries

in southeastern Europe into special bilateral trading arrangements with the Reich.

Japan created the Greater East Asian Co-Prosperity Sphere to siphon off Asian trade

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for its own benefit. Although the world economy recovered slowly from the

depression, the spread of high tariffs, import quotas, discriminatory practices and

foreign exchange restrictions meant that world trade remained stagnant and

compartmentalized throughout the 1930s.

The tragic economic and political consequences of that "low dishonest decade"

spurred some officials to think about a new economic framework. Marked by the bitter

experience after World War I, Cordell Hull -- FDR's Secretary of State -- came to

believe that "unhampered trade dovetail[s] with peace; high tariffs, trade barriers and

unfair economic competition, with war." As he declared, "I will never falter in my

belief that enduring peace and the welfare of nations are indissolubly connected with

friendliness, fairness, equality and the maximum practicable degree of freedom in

international trade." Due to Hull's guidance and persistence, Congress enacted the

Reciprocal Trade Agreements Act of 1934, which gave the executive branch the

authority to undertake bilateral negotiations to reduce tariffs. Although the trade

agreements negotiated during the 1930s had a limited effect, it marked a significant

departure from the old non-negotiable high tariffs enacted by Congress, and set the

stage for a new era in U.S. trade policy.

World War II provided the opportunity for Anglo-American cooperation on postwar

commercial policy. While the Americans envisioned expanding the bilateral approach

it had taken in the 1930s, the British advocated a much more ambitious multilateral

approach. In 1942, James Meade, then a U.K. civil servant and later a professor and

Nobel laureate in economics, drafted a plan for an International Commercial Union,

the trade counterpart to John Maynard Keynes's proposal for an International Clearing

Union for postwar finance. After the War Cabinet endorsed Meade's plan, British and

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American officials began informal discussions about the shape of the postwar trading

system.

These informal meetings eventually led to the 1947 GATT conference in Geneva. The

U.S. and Britain, along with other countries, exchanged tariff reductions and finalized

the provisions of the GATT. Although the Anglo-American delegates agreed on the

overriding objective of freeing trade, the negotiations were difficult and required many

compromises.

The U.S. insisted that the most-favored nation (MFN) clause -- ensuring

nondiscrimination in trade -- be the Article I cornerstone of the GATT because it

wanted to prevent the spread of Imperial preferences that discriminated against its

exports. Fearful of its postwar financial situation, Britain demanded large American

tariff cuts in exchange for a reduction in preferences and wanted the freedom to

impose quantitative restrictions on imports in case of balance of payments difficulties,

something that became Article XII of the GATT.

Initially, the tariff reductions negotiated in Geneva had a limited impact on

international trade because wartime exchange controls and quantitative restrictions

remained in place. However, as these controls were phased out during the 1950s, the

lower tariffs allowed world trade to grow rapidly. The expansion of world trade

promoted the rapid economic recovery of Europe and Japan. In turn, the spread of

economic growth allowed democracy to become firmly established in a way that had

failed dismally during the interwar period.

By the 1960s, the flourishing world economy gave the GATT participants the

confidence to build on this early success and reduce tariffs and non-tariff barriers even

more. Thus followed the Kennedy Round in the 1960s, the Tokyo Round in the 1970s,

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and the Uruguay Round in the late 1980s and early 1990s, each of which chipped

away at the protectionist walls blocking world trade. In 1995, the World Trade

Organization (WTO) was established in recognition of the fact that world trade rules

had been extended to services, intellectual property and other new areas of trade.

Over its 60-year history, the GATT has had many shortcomings. Agricultural trade has

largely eluded liberalization. The current spread of preferential trade arrangements, in

the form of bilateral and regional so-called free trade agreements, have reintroduced

discriminatory trade practices in a way that weakens the multilateral system built on

the MFN clause.

The GATT has also gone through many difficult phases. The world economy went

through a particularly dangerous period in the late 1970s and early 1980s, when

sluggish growth and painful structural adjustments led many countries to ignore the

GATT rules altogether. Trade barriers in the form of voluntary export restraints and

orderly marketing arrangements proliferated, restricting trade in sectors such as

automobiles, steel and textiles. In this environment, the prospect for new trade

negotiations seemed so dismal that some suggested "the GATT is dead."

Despite these shortcomings and difficulties, the GATT framework has survived as a

durable code of conduct for commercial policy and dispute resolution. Tariffs have

been ratcheted down, the penchant for voluntary trade restrictions has been put to rest,

and potential trade wars have been peacefully defused. The relevance of the GATT is

reflected in the WTO's ever-growing membership, now up to 150 countries.

The prosperity of the world economy over the past half century owes a great deal to

the growth of world trade which, in turn, is partly the result of farsighted officials who

created the GATT. They established a set of procedures giving stability to the trade-

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policy environment and thereby facilitating the rapid growth of world trade. With the

long run in view, the original GATT conferees helped put the world economy on a

sound foundation and thereby improved the livelihood of hundreds of millions of

people around the world.

The task for statesmen today is to look beyond short-term political considerations,

arising from the complaints of special interests that fear market competition and the

parsing of subsidies, and bring the ongoing Doha Round to a successful conclusion. If

immediate steps cannot be taken to liberalize trade, then the phasing in of reforms and

the phasing out of subsidies over many years is perfectly consistent with the long-term

objectives of the GATT. We should remind ourselves how much poorer the world

would be today without the politically courageous decisions made by visionary

diplomats meeting in Geneva 60 years ago this month.

Even as the World Bank and International Monetary Fund struggle to rethink their role in

the modern world economy, the role of the GATT and WTO is secure. The postwar

expansion of world trade fostered by the GATT has made a lasting contribution to world

prosperity and, as Cordell Hull suggested, to world peace as well.

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CONCLUSION

The General Agreement on Tariffs and Trade (GATT) is a multilateral agreement

regulating international trade. According to its preamble, its purpose is the "substantial

reduction of tariffs and other trade barriers and the elimination of preferences, on a

reciprocal and mutually advantageous basis."

It was negotiated during the UN Conference on Trade and Employment and was the

outcome of the failure of negotiating governments to create the International Trade

Organization (ITO). GATT was signed in 1948 and lasted until 1993, when it was

replaced by the World Trade Organization in 1995. The original GATT text (GATT

1958) is still in effect under the WTO framework, subject to the modifications of GATT

1994.

The World Trade Organization (WTO) is an organization that intends to supervise and

liberalizeinternational trade. The organization officially commenced on January 1, 1995

under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade

(GATT), which commenced in 1948. The organization deals with regulation of trade

between participating countries; it provides a framework for negotiating and formalizing

trade agreements, and a dispute resolution process aimed at enforcing participants'

adherence to WTO agreements which are signed by representatives of member

governments and ratified by their parliaments. Most of the issues that the WTO focuses

on derive from previous trade negotiations, especially from the Uruguay Round (1986

1994).

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BIBLIOGRAPHY

ARTICLES:

1. Douglas Irwin, an economics professor at Dartmouth, is author of "Free Trade

Under Fire" (Princeton, 2005).Monday, April 9, 2007

WEBSITES:

1. www.google.com

2. www.gatt.org

3. www.wto.org

REFRENCES:

1. World Trade Organization: WTO legal texts; General Agreement on Tariffs and

Trade 1994

2. a)The GATT years: from Havana to Marrakesh, World Trade Organization

b)Timeline: World Trade Organization A chronology of key events, BBC News

c)Brakman-Garretsen-Marrewijk-Witteloostuijn, Nations and Firms in the Global

Economy, Chapter 10: Trade and Capital Restriction

3. http://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm

4. http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm

5. http://www.wto.org/english/thewto_e/acc_e/a1_syrian_arab_republic_e.htm

6. http://www.wto.org/english/news_e/news10_e/gc_04may10_e.htm

7. What is the WTO? (Official WTO site)