General Agreement on Tarriffs and Trade

After World War II the US and its economic partners set out to develop an architecture for global trade. The first agreement concerning exchange rates and international monetary policy was the Bretton Woods Agreements. However, as early as 1947, negotiations were underway in Geneva to reach an agreement on tarriffs and trade.

A principle element of GATT is the idea of Most Favored Nation trading status, which persists to this day. The idea is that each country comes up with a list of allies whom they are willing to trade "fairly" with. All of the countries on this list receive the same level of tarriff as all others on the list. Thus the term Most Favored Nation is inappropriate - it should properly be Least Disfavored Nation.

Before yielding way to the World Trade Organization, GATT went through several modifications during mass diplomatic conferences called rounds. The Geneva Round was the first, where informal trade agreements were drafted and signed by 23 nations. In the late 70s GATT was reconvened in Tokyo to tackle new issues, mostly involving non-tarriff related trade practices such as Voluntary Export Restraints and subsidies. The effect of this round was to codify the understandings previously reached and establish rules for reciprocity.

The final round of GATT negotiations began in Uruguay in 1986, and concluded eight years later in Marrakesh. By the time of its conclusion GATT had swelled from 23 member countries to 117. One of the primary achievements of the Uruguay Round was the General Agreement on Trade in Services, or GATS. This agreement allowed for deeper integration of the world economy, allowing free trade not just of goods but of information and labor.

Compared to the WTO, GATT was relatively narrow in its scope and limited in its power. This is perhaps the only reason it worked. Initially the United States was considering an alternative - The International Trade Organization, or ITO. However Congress's concern over protecting domestic industry prevented the bill from passing. GATT never passed Congress either, but it never had to. It simply laid out the ground rules for acceptable global trade practices, and was initially not a treaty.

The WTO owes much of its strength to the years of negotiation that went into GATT. Without decades of proof that international trade is multilaterally beneficial, no country in the world would agree to what we have today.

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