Friday, August 28, 2009

General Agreement on Tarrifs and Trade (GATT) and its Objectives

The General Agreement on Tarrifs and Trade (GATT) emerged from the “ashes of Havana Charter”. The world had experienced the rigours and problems of an extensive pattern of trade barriers in 1930’s and during the Second World War. So the Allied Powers thought of having a liberal world trading system after World War II. For this purpose the International Conference on Trade and Employment was held in Havana in the winter of 1947-48. Fifty three nations drew up and signed a charter for establishing an international Trade Organization (ITO). But the US congress did not ratify the Havana Charter with the result that the ITO never came into existence. Simultaneously twenty three nations agreed to continue extensive tarrif negotiations for trade concessions at Geneva which were incorporated in a General Agreement on Tarrifs and Trade (GATT). This was signed on October 30, 1947 and came into force from January 1, 1948.

GATT is a multilateral treaty which has been signed by 92 governments, at present known as “Contracting Parties”. Thirty one other countries apply GATT rules defacto. The GATT is neither an organisation nor a court of justice. It is simply a multinational treaty which now covers 50 percent of the world trade. It is a decision making body with a code of rules for the conduct of international trade and a mechanism for trade liberalization. It is a forum where the contracting parties meet from time to time to discuss and solve their trade problems, and also negotiate to enlarge their trade. The GATT rules provide for the settlement of trade disputes, call for consultations, wave trade obligations and even authorize retaliatory measures.

The GATT is permanent organization having a permanent council of Representatives with head quarters at Geneva. Its function is to call international conferences to decide on trade liberalization on a multilateral basis.

Objectives of GATT:

The basic objectives of GATT were to serve as clearing house for the member countries regarding the issue of world trade. In other words, GATT is a forum where members of GATT will make negotiations regarding problems of trade i.e. removal of trade restrictions or liberalization of world trade. More broadly the basic objective of GATT was to liberalize wolf trade in such a way that no country should provide preferential Treatment to the other country. It means that this institution is aimed at abolishing discrimination regarding trade concessions and facilities between member countries. It means that members of GATT have to accept “Most Favoured Nation Clause”. This clause means that “a member country is agreed upon that it will not provide any facility or concession to any member country which it is not providing to other members of GATT.

Another objective of the GATT is grant protection to domestic industry through fundamental component of GATT is a negotiated balance of mutual tarrif concessions among contracting parties. The contracting parties commit themselves not to raise import tarrifs above the negotiated rates. In this way it tries to protect domestic industries of all contracting parties.

The ultimate aim of establishing liberal world trading system is to raise living standard, ensure full employment through a steadily growth effective demand and real income, develop fully the resources of the world and expand the production and exchange of goods on global level.


3 Responses to “General Agreement on Tarrifs and Trade (GATT) and its Objectives”

annu said...
December 12, 2011 at 7:29 AM


shivangini gupta said...
May 4, 2012 at 11:26 PM

can u plzzzz..... post some notes on significance of GATT......

April 22, 2013 at 4:27 AM


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