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GATT (General Agreement on Tariffs and Trade)

  is the institutional framework established in 1947 to regulate international trade in merchandise. It was one of the three international institutions (the others being the International Monetary Fund and the World Bank) created as part of the United States-led \'new international economic order\' in the immediate post-war period. Initially 23 countries belonged to the GATT; today there are more than 120 member states. More than 90 per cent of world merchandise trade is now covered by the GATT.

The GATT is a rule-oriented approach to multilateral trade cooperation. Its fundamental basis is that of non-discrimination which incorporates two principles. The most-favoured nation principle states that a trade concession negotiated between two countries must also apply to all other countries within the GATT. The national treatment rule requires that imported goods are treated in the same way as domestic goods. An important development occurred in 1965 with the inclusion of a generalized system of preferences, which granted preferential access of developing country products to developed country markets (important exceptions were clothing and textiles).

Negotiations to liberalize international trade have been conducted in a series of \'rounds\' which have occurred at irregular intervals. There have been eight such rounds since 1947, the most recent being the protracted and contentious Uruguay Round which began in 1986 and was finally concluded in 1994. The GATT is generally regarded as being instrumental in the progressive lowering of tariff barriers to international trade. In 1940, the average tariff on manufactured products was approximately 40 per cent; in the mid-1990s it was down to 4 per cent. However, the GATT has been far less successful in constraining the proliferation of non-tariff barriers (such as import quotas).

The Uruguay Round was the most ambitious and wide-ranging of all the GATT rounds. For the first time it incorporated agriculture, textiles and clothing into the GATT. Special agreements were concluded in services (GATS — the General Agreement on Trade in Services), intellectual property rights (TRIPS — Trade-Related Aspects of Intellectual Property Rights), and trade related investment (TRIMs — Trade-Related Investment Measures). The major organizational development was the incorporation of the GATT and the other agreements into anewWorld Trade Organization (WTO) which came into being in January 1995, almost 50 years after the original proposal to create an International Trade Organization foundered. During that period, the GATT had continued to be merely a \'temporary framework\'.

A number of contentious issues remain in the aftermath of the Uruguay Round to be addressed by the WTO. For example, the GATS is far from being fully agreed. More broadly, there is considerable pressure from a number of developed countries, led by the United States, to incorporate considerations of labour standards and the environment into the WTO\'s remit on the grounds that labour and environmental differentials distort free trade. This is strongly opposed by developing countries who see such moves as disguised protectionism. (PD)

Suggested Reading Bhagwati, J. 1988: Protectionism. Cambridge, MA: MIT Press. Dicken, P. 1998: Global shift: transforming the world economy, 3rd edn. London: Sage; New York: Guilford, ch. 3. Hoekman, B. and Kostecki, M. 1995: The political economy of the world trading system: from GATT to WTO. Oxford: Oxford University Press. Stubbs, R. and Underhill, G.R.D., eds, 1994: Political economy and the changing global order. London: Macmillan.



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