GAAT Structure, Functions and Roles in the Current International Business Scenario
GAAT Structure, Functions and Roles in the Current International Business Scenario: Following World War II, the General Agreement on Tariffs and Commerce (GATT) was established to promote global economic recovery by rebuilding and liberalising global trade. The major goal of the GATT was to lower obstacles to international commerce by lowering tariffs, quotas, and subsidies. Since then, the World Trade Organization (WTO) has taken its place (WTO).
The General Agreement on Tariffs and Trade (GATT) was established in 1947 with the signing of a treaty by 23 nations, and it went into effect on January 1, 1948. GATT remained one of the most important aspects of international trade agreements until the World Trade Organization was established on January 1, 1995. By this time, 125 countries had signed the accords, which covered over 90% of world commerce.
GATT’s goal was to establish regulations to eliminate or limit the most expensive and inefficient characteristics of the pre-war protectionist era, notably quantitative trade barriers like trade restrictions and quotas. The pact also established a mechanism for resolving economic disputes between states, as well as a framework for multilateral tariff reduction discussions. In the postwar years, the GATT was seen as a great success.
GAAT Structure, Functions and Roles in the Current International Business Scenario
GATT’s Most Important Achievement
Trade without discrimination was one of GATT’s major accomplishments. Every GATT signatory was to be treated on an equal footing with the others. This is known as the principle of the most-favored country (and it has been carried through into the WTO). As a result, once a nation had negotiated a tariff reduction with a few other countries (generally its most significant trade partners), the same reduction would be applied to all GATT members. There were escape provisions in place, allowing nations to negotiate exclusions if tariff reduction would disproportionately hurt local producers.
When it came to determining tariffs, most countries used the most-favored-nation approach, which virtually supplanted quotas. Tariffs (which are better than quotas but are still a trade barrier) were gradually reduced in consecutive rounds of talks. By the conclusion of the Uruguay Round, the average tariff rate had dropped from over 22% when the GATT was initially signed in Geneva in 1947 to roughly 5%. (concluded 1993). The Uruguay Round also resulted in the establishment of the World Trade Entity (WTO), a formal organisation that has absorbed and expanded the GATT.
Basic Information and Structure
Following World War II, the United Kingdom (UK) and the United States (US) proposed to the United Nations’ Economic and Social Council (ECOSOC) the creation of an international trade entity to be known as the International Trade Organization (ITO). That is possibly why the GATT is often referred to as a UN-affiliated organisation, and its materials are sometimes mislabeled as UN documents.
In 1946, ECOSOC called a meeting called the United Nations Conference on Trade and Employment to discuss the UK and US ideas. The ITO Charter was developed by a Preparatory Committee and accepted in 1948 during a convention in Havana, Cuba. The Havana Charter or the ITO Charter are two names for the same document.
Because the parties were eager to begin the process of trade liberalisation as soon as possible, the first round of trade discussions took place while the Preparatory Committee was still working on writing the Charter. The General Agreement, which was signed in 1947, reflected their findings.
The GATT language includes relatively little “institutional” structure since the initial signing states intended the agreement to become part of the more permanent ITO Charter. As the GATT membership and laws controlling commerce between so many of the world’s countries have increased, this lack of clarity within the agreement has produced growing issues. Even though it has never been formally recognised as such, the GATT has served as an international organisation for many years.
The Interim Commission for the ITO, or ICITO, was formed by ECOSOC. Unfortunately, when it came time for members to ratify the ITO Charter, the US Congress refused, and the ITO was never implemented.
The General Agreement on Tariffs and Trade (GATT) survived, but only because of the Protocol of Provisional Application of the General Agreement on Tariffs and Trade, which was signed in 1947 and entered into effect in 1948.
The GATT concluded eight rounds of multinational trade talks (MTNs). The Uruguay Round (the 8th round) ended on April 15, 1994, in Morocco, with the signature of the Final Action, which resulted in the World Trade Organization (WTO) and its annexes.
The contractual party’s means are as follows:
(I) When CONTRACTING PARTIES is written in capital characters, it refers to the members acting together.
(ii) Individual member states are referred to when contractual parties is written in lower case letters.
(iii) The term “Contacting Parties” will appear in press releases or published works related to the GATT.
The GATT’s Fundamental Functions
Treatment for the Most-Favored-Nation (MFN)
This is the GATT’s core premise, and its inclusion in Article 1 of the GATT 1947 is no accident. It specifies that each GATT contracting party must give all other contracting parties with the same trading conditions as the most advantageous terms it offers to any of them, i.e., each contracting party must treat all contracting parties in the same manner as its “most-favoured country.”
Reciprocity
The GATT promotes the “rights” and “obligations” doctrines. Each contractual party has a right, such as MFN access to other trading partners’ markets, as well as a responsibility to respond with MFN trade concessions. This is connected to the MFN idea in certain ways.
Transparency
The necessity to unify the system of import protection, so that trade obstacles may be decreased via the negotiating process, is essential to a transparent trading system. As a result, the GATT confined the use of quotas to a few select sectors, such as agriculture, and pushed for “tariff-only” import regimes.
Furthermore, the GATT, and now the WTO, required contracting parties to submit several notifications about their agriculture and trade policies so that they could be scrutinised by other parties to verify that they were GATT/WTO compliant.
Tariff Reduction and Tariff Binding
Tariffs were the primary method of trade protection when the GATT was created, and early discussions focused largely on tariff binding and reduction. The language of the 1947 GATT spells out the contracting parties’ responsibilities in this respect.