Question

Discuss the role of the General Agreement on Tariffs and Trade (GATT) in international business?

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Answer 1

The General Tariff and Trade Agreement (GATT) was a multilateral trade agreement between countries to control international trade and tariffs according to common laws, norms or code of conduct. GATT was founded in Geneva in 1948 to follow the goals of free trade with a view to promoting growth and development in all Member States. GATT is composed of 117 member nations. GATT's primary aim was to protect competition in commodity trading by eliminating or raising trade barriers.

GATT acted as an important international platform for the continuation of tariff negotiations. Under GATT, member nations met at regular intervals to discuss agreements to eliminate foreign trade limits, tariffs and certain other constraints. The GATT was a permanent international economic body for multilateral trade expansion until it was replaced in 1995 by the World Trade Organization (W.T.O).

GATT goals- Extension of foreign trade; increase of world development by ensuring maximum jobs in the participating countries. Creation and full use of world resources; and revision of the international community's standard of living as a whole.

The guidelines adopted by GATT are based on the following basic principles: trade should be conducted in a non-discriminatory manner; the use of quantitative limitations should be condemned; and consultations should address disputes.

The GATT recognized that tariffs are indeed a major barrier to foreign trade. Consequently, the GATT will enable tariff reduction negotiations to be undertaken on a reciprocal and mutually beneficial basis, taking into account the differing needs of the individual contracting parties. The 1993 Uruguay Round of talks was highly optimistic and complex. In addition to the conventional tariff and non-tariff measures, new fields such as Trade-related Intellectual Property Rights (TRIPS), Trade-related Investment Measures (TRIMS), and Trade in Services were discussed.

Member countries varied in such areas as forestry, textiles, TRIPS and anti-dumping. The Uruguay Round has broadened GATT's reach to include utilities and agriculture. The Uruguay Agenda was looking to eliminate all barriers to trade.

When they were engaged in trade relations, each contracting party would follow these fundamental principles, or they would be blamed, and even taken revenge by others. In addition, negotiating parties reached quite a few agreements and made other laws during the ongoing multilateral trade negotiations. Kennedy Round, for example, which started in May 1964, brought in the Anti-dumping Agreement. (WTO). (WTO). These rules and agreements which were later negotiated in the multilateral rounds became the fundamental principles agreed by all the parties and stimulated the growth of international trade

GATT reduced tariffs on the basis of mutual benefit, and accelerated trade liberalization after the Second World War. GATT's main contribution was to reduce tariffs by sponsoring "rounds" of multilateral negotiations. There was a significant reduction of the tariff by sponsoring the multilateral negotiations. The overall tariff cuts in both Kennedy Round and Tokyo Round is nearly 35 per cent. Future more, in the Uruguay Round, which was the most successful in the history of multilateral GATT negotiations, the contracting parties followed the rules that kept the the tariff rate, this round of negotiations resulted in an average tariff cut of 39 percent.

GATT reduced tariff and trade discrimination which promoted the reduction of other barriers to trade. As stated in Article II: concession schedule in "GATT 1947," "Each Contracting Party shall grant no less favorable treatment to the trade of the other Contracting Parties than provided for in the relevant part of the relevant schedule annexed to this Agreement."

The GATT has to some degree secured the advantages of developed countries for foreign trade. One of GATT's fundamental objectives was "to increase living standards and gradually improve the economies of all contracting parties, and to find that achieving these goals is especially urgent for less-developed contracting parties." In order to achieve this aim, GATT defined several special measures for less-developed countries, such as tariff provision.

Non-tariff barriers (especially export subsidies) have been dramatically reduced in agriculture, turning virtually all nontariff barriers to agriculture into tariffs. The tariff imposed on manufactured goods imported from developed countries was reduced by an average of 40 per cent in manufactured trade. Both of these metrics reduced the pressure on developing countries 'economies, and had positive effects on trade growth for less developed countries.

After World War II ended, GATT reduced the tariff and improved the economy by promoting imports and exports between countries again. The rates of tariffs set by each government were very high after World War II ended. Since GATT was established, it actively performed is a position in international trade, it reduced tariffs by holding multiple rounds of multilateral negotiations with each round held with months or even years. In the big rounds previous to the Uruguay Round, in each round, there was a tariff cut of more than 21 per cent achieved. The participants had reached an agreement in the Uruguay Round that included 550 pages of tariff reduction on 85 per cent of world trade.

GATT was also established to reverse the 1930s trade policies that suggested greater limitations and inequality in world trade. This goal is to stop the countries that are trying to isolate themselves from the Great Depression through what becomes a "beggar-thy-neighbor" policy so that these anti-trades come up in part here. GATT is intended to help countries allow more imports and exports by reducing tariffs so that, before those countries have blocked imports, it is proven to be a futile method of raising domestic employment due to the economic downturn. Because of new investments from the other countries exports and imports would increase the number of work vacancies.

In trade transactions with developed countries it helps the developing countries. The GATT also reduced tariffs on developed countries during the Uruguay Round. After the Uruguay Round, there was a major decrease in the average tariff rate in the less developed countries. The average tariff rate in India, for example, was 71.4% before the Uruguay Round, and the percentage fell dramatically after the Uruguay Round, 32.4%. This has reduced the economic disparity between developed countries and developing countries by reducing the tariff and other trade barriers on developing countries, and by encouraging the economic growth of developing countries.