Development of GATT

Origin

Originally the IMF and the World Bank were to be accompanied by an International Trade Organisation.  The Bretton Woods Agreement made in 1944 proposed the formation of an International Trade Organization to oversee international liberalised free trade. The ITO  was to administer and harmonise world trade and develop comprehensive codes for the conduct of world trade.

The intended International Trade Organization was not established, due in particular, to opposition from the United States.  The United States did not ratify the International Trade Organisation Charter after the agreement was signed in 1948. Most governments wished to see if the U.S. would first ratify it, and having not done so, the Charter never came into effect.

The GATT signatories signed a provisional protocol of provisional application of the GATT. The United States administration had authority under delegated legislation to negotiate and implement a trade agreement but did not power to change existing substantive law without the consent of Congress.

The provisional arrangement was entered between 23 major countries as a prelude to the formation of an International Trade Organization. Ultimately, this agreement, the General Agreement on Tariffs and Trade (GATT) entered in 1947, became the permanent basis for world trade. Ultimately, a World Trade Organisation was not formed until the 1990s. There are now 160 members.

Under the GATT Treaty, members states agreed to enter negotiations from time to time on a mutual and reciprocal advantage basis, for reductions in the general level of talks.

There have been successive rounds of negotiations on trade liberalisation by GATT members. They have focused increasingly on non-tariff barriers to trade, being government measures, laws, policies, technical standards, regulatory standards and procurement policies, which are in effect, a barrier to trade.

1950s

Since the signing of the original GATT Agreement, there have been a number of successive rounds of negotiations as contemplated by it. The first five rounds followed quickly in the late 1940s and 1950s and involved the exchange of requests and offer lists by the state parties. They were made available subsequently to all participants who were to take them into account in bilateral negotiations and revision of lists.

Attempts were made to seek multi-lateral concessions and arrangements. State parties offered benefits in return for concessions from other parties. The first number of rounds had a minimal effect in terms of the development of the GATT and reduction of duties. The United States was constrained by what it could offer. Congress was prepared to legislate to some extent. In Europe, the European common market supervened the position as between the European states.

U.S. Congress permitted greater concessions in the fifth-round of the initial negotiations in  1958. This was the first round after the establishment of the European Economic Community. The round successfully integrated the European EEC into GATT.

Kennedy Round

1962 legislation in the United States authorised across the board negotiations seeking substantial reductions in the average rates of duty. The Kennedy Round was established in (1963).

The state parties sought mutually reciprocal concessions. This led to issues of interpretation of the original agreement in terms of measurement of the benefits concerned. The contracting parties, in particular, the EEC and the US sought to agree on target reductions in rates,for major categories of goods with undertakings to reduce progressively between the existing rate and the target rate).

The parties disagreed on what was required by reciprocity. A  definition of reciprocity in terms of the ultimate rate was asserted by the United States. This EEC proposal was not accepted by the US on the basis that it did not give the required mutual trade benefits as was required by the US enabling legislation. The US enabling legislation had enabled reductions of up to 50% but excluded areas the subject of exclusions under the original agreement. This caused other states in reliance on reciprocity to reserve their own right to maintain their own exceptions.

Ultimately the Kennedy Round of negotiations was a product by product round with some elements of across-the-board negotiations. The Round did lead to significant duty reductions on many goods.

Tokyo Round

By the early 1970s and largely due to the Kennedy Round negotiations, the level of tariffs on most industrial products had fallen substantially and was not considered to be a significant barrier to trade as had formerly been so.

The parties focused more on non-tariff barriers to trade. These included measures such as requirements to purchase national products, procurement requirements, subsidies, export credits, tax credits and other measures which might appear ostensibly justifiable but may be disguised restrictions. Some measures were in the nature of voluntary export constraints.

The EU and the United States urged a new round of negotiations in 1972, and a formal declaration made in Tokyo in 1973 opened a round of comprehensive multilateral trade negotiations. The Tokyo Round expressly sought to focus on non-tariff measures seeking to proceed on the basis of principles of mutual advantage, commitment and overall reciprocity while observing the most-favoured-nation clause and seeking, to the achievement of an overall balance of advantage at the highest possible level.

Almost 100 states participated in the Tokyo Round, twice that of the Kennedy Round. A number of general agreements or codes were proposed which interpreted the GATT Agreement and gave more precise effect to it. They were open to all parties without requiring a particular number to ratify. They  thus facilitated development which would not have been forthcoming through amendment of the agreement itself.

The Codes would be binding on the parties who accepted them, In the case of some Codes which conferred new benefits, states were effectively required to be party to the Code and undertook to abide by their commitments to obtain the benefits. This was particularly so in respect of the Government Procurement and Subsidies Codes. The Codes and Agreements might, for example, afford a stricter definition in one context with a corresponding benefit to the state concerned in another context.

Ultimately, several of the Tokyo Round Codes were amended in the Uruguay Round and led to the new GATT 1994 and WTO arrangement. In several cases, all states that wished to be part of GATT/WTO were required to adhere to certain Codes in their entirety.

The final act of the Tokyo Round was completed in 1979 with all major industrial countries being a party but with many developing countries not party. Later a number of developing countries did sign up to several of the Codes.

The Tokyo Round failed to conclude an agreement in respect of safeguards. These are measures permitted against certain unforeseen imports of particular products, typically a quota. In some cases, they are taken by states and in other cases taken by industry with the or tacit approval of the government. The Agreement sought to provide that the injury must be serious and that the measures the imports must cause or be its principal cause and there be a limitation on the time periods.

Tariffs were cut in the Tokyo Round with an agreement on a formula for overall reductions. In broad terms, the higher the tariffs, the higher the percentage reduction, over a period of eight years.

Uruguay Round & WTO

In 1986 a new ministerial meeting of GATT was convened in Uruguay and agreed to initiate a further round of multilateral trade negotiations. The background was the emerging trade deficits between the United States in particular, and Japan and other East Asian countries and the development and emergence of services and related issues as in international trade.

An ambitious agenda was prepared to include trade-related aspects of investment, intellectual property services, agriculture and safeguards. It  also sought to improve the rules and procedures for dispute settlement.

Peter Sutherland, former Irish Attorney General and Competition Commissioner of the EU played an important role in bringing the Uruguay Round to a conclusion.The Uruguay Round Final Act was signed in April 1994 by representatives of 111 countries. There are now over 150 state members.

A key outcome of the Uruguay Round was the establishment of the World Trade Organization.The World Trade Organization was established on 1^st January 1995. The WTO Agreement replaced and restated the GATT Agreement. However, it expressly provided that the WTO would be guided by the decisions, procedures and customary practices adopted by the contracting parties to GATT 1947 and the bodies established under that framework.

The understanding and dispute settlement mechanism extends the prior dispute assessment mechanisms which developed and makes them applicable to all agreements within the GATT/WTO system. It provided for binding decisions and compensation and permitted retaliation for non-compliance.

Other Uruquay Round Agreements

A number of specialised agreements were entered under the Uruguay Round in the. A General Agreement on Trade in Services was entered.

Certain further specialized agreements were entered including the agreement on

• Agriculture,
• Textiles,
• Trade Related Intellectual Property Rights,
• Trade Related Investment Measures,
• Trade in Services,
• Sanitary and Phytosanitary measures,
• Technical Barriers to Trade.

The General Agreement on Trade in Services came into force in 1995 and applies to all WTO members. It applies to all services other than those provided by a government authority neither on a commercial basis nor in competition with other suppliers. 

Agreements were reached on intellectual property services and investment. Importantly, agreements which had previously failed were entered in relation to safeguards and agriculture. The dispute settlement mechanism was enhanced with a binding mechanism of settlement.

A significant issue was the disagreement between Europe and the USA in relation to agriculture. Key elements of the outcome in relation to Agriculture included most remaining quotas being converted to tariffs and modification of the CAP structure over a period.

The Agreement on Trade-Related Aspects of Intellectual Policy brings intellectual property within the scope of WTO. It applies the most-favoured-nation and non-discrimination principles in that field. They bring in the long-standing Paris and  Berne Conventions within the enforcement mechanisms of WTO.

The WTO created a Trade Policy Review Body to undertake surveillance of measures which may affect the functioning of the system. Larger countries are subject to review every two years. Countries with a lesser impact on trade are subject to progressively less frequent reviews of every four years or at least every six years.

With the exception of agreements on procurement, dairy products, bovine meat and civil aircraft, all agreements including those initially agreed in the Tokyo Round are binding on all members. There were now 12 agreements binding on all members of WTO.

The GATS, General Agreement on Trade and Services is separate from GATT but is binding. It is limited to commitments made.

Doha Round Failure

Negotiations in the Doha Round were launched in 2001 but have been stalled since 2008. The Bali package in 2013 comprised 10 measures to facilitate trade including the Trade Facilitation Agreement.

Negotiations under the Doha Round have been ongoing since 2008 seeking liberalisation in investment and competition policy and in agricultural markets and trade.