Main Accomplishments of General Agreement on Tariffs and Trade - Example

Table of Contents 1.0 Introduction 2 2.0 General Agreement on Tariffs and Trade (GAAT) 2 3.0 Main Accomplishments of GAAT 4 4.0 Difference between GAAT and WTO 6 5.0 Conclusion 7 6.0 References 8 1.0 Introduction The report will help the readers to understand different aspect of General Agreement on Tariffs and Trade (GAAT) and its role in international trade. The paper on the forefront highlights information about GAAT and then shows the different contribution and accomplishments which have been achieved under GAAT. The paper then highlights the difference that exists between GAAT and World Trade Organization (WTO) so the difference in the functioning of both can be understood. This will thereby help the readers to understand the manner in which both GAAT and WTO works in an international arena. 2.0 General Agreement on Tariffs and Trade (GAAT) The General Agreement on Tariffs and Trade (GAAT) is part of the Bretton Woods Conference which was created with the objective of ensuring economic recovery especially after the impact World War II had left. GAAT is a set of multilateral trade agreement which was created so that the rigid quota system and tariffs can be reduced among nations so that trade could between nations can take place. Initially GAAT had 23 nations as its member and it started its operations from 1st January 1948. GAAT played a huge role in shaping the manner in which trade was carried out between countries and resulted in increasing the overall world trade. GAAT was finally replaced by World Trade Organization (WTO) in 1995 when 125 countries signed as signatories. It became one of the most prominent code of conduct and governs more than 90 percent of the overall trade carried out over the world. GAAT is a set of rules and principles which has its applicability on trade and fosters towards increasing international trade among nations. The main objective of GAAT was to reduce the different barriers which international trade was witnessing in the form of quotas, trade barriers, tariff rates, and other subsidies. It is also seen that GAAT was not an organization but an agreement among the different nations to carry business without any barriers. The main objectives which GAAT looked towards accomplishing are as Improving the standard of living of people through better trade relations Achieving full employment and ensuring economic stability for all nations which includes developed and developing economies Increasing the volume of real income through the process of creating demand for different goods and services and trading those goods and services among nations Increase in production of goods and services and increased emphasis on exchange of goods Using the different resources in a manner through which growth of economies become possible GAAT looked towards ensuring that nations enter into multilateral agreement among themselves with the objective of relaxing the different trade rules among nations. This would provide flexibility and help the business both domestically and internationally. The basic principle based on which GAAT was developed was to remove differences among nations and opening up the economies so that free trade could be carried out. GAAT further looked at providing the participating nations with special tariff concession so that liberalization could take place. The rules implemented by GAAT had certain fixed and rigid rules which every participating member had to follow and some rules which were flexible. The rules were developed in such a manner that tariffs were allowed to a certain degree so that no nations could take advantage of the other. This provided flexibility and ensured that different clauses provided different trade concession which helped the different participating members to garner maximum advantage. The most successful trade liberalization agreement was carried in the Uruguay which has been discussed later in the report. With more and more countries becoming a part of GAAT the risk and challenges increased. Since, GAAT had little or no power in relation to countries which violated the different terms prescribed it made countries use the different terms for its own advantage. As a result an institutional framework under the name World Trade Organization (WTO) was developed in 1995 where 125 countries became signatory to it. The WTO was created with the objective of reducing tariffs and barriers so that international trade could foster; developing a forum so that disputes among nations can be solved; increased and better surveillance on trade; increased cooperation among nations so that international trade increases (Dadush, 2009). 3.0 Main Accomplishments of GAAT GAAT has been successful in reducing trade barriers between different countries. GAAT was operational from 1948 to 1993 where different agreements and round was carried out for discussing the different aspect which would improve trade and was finally concluded in the Uruguay. The greatest contribution of GAAT is witnessed in the Uruguay round where multilateral rules were strengthened and more powers were vested so that better control can be exercised over the different participating countries. Changes were made in geo-politics so that fresh and new commitments can be made which would bring more and more countries under its purview and would help to improve international trade further. Some of the major contributions which GAAT achieved are as Reducing global tariffs by one third within a period of 10 years Imposing new restriction on subsidies so that trade distortions can be reduced Increase the power of GAAT so that disputes can be settled which arises from time to time among the participating members Increased power to the GAAT Secretariat so that the different trade rules can be reviewed from time to time and changes can be made accordingly (Dadush and Bennett, 2010). Identifying new policies and rules in relation to intellectual property and ensuring proper enforcement of the same Developing multilateral rules so that trade can be improved among nations The above accomplishments helped GAAT to attract more and more members which finally resulted in the creation of WTO. Apart from the above mentioned objective some of the other accomplishments are as GAAT over its existence was able to enjoy the membership of more than 100 countries and was able to generate around 85 to 95 percent of the global trade GAAT was successful in implementing trade liberalization policies which was supported by more than 50 countries and contributed around 75 percent of global trade (Cuyvers, Philippe De and Stijn, 2005). During the Tokyo Round in 1973 GAAT was successful in adopting NTB which helped to reduce the weighted average tariff on import from 7 percent to 4.7 percent in nine major industrial markets GAAT was further successful in stabilizing the world economies especially after the Second World War which had large impacts on the future of economies. Finally the GAAT was replaced by WTO in 1995 and is carrying out its operations there after 4.0 Differences between GAAT and WTO World Trade Organization was established after the Uruguay round and was established with the purpose of developing rules and policies which facilitates international trade among countries. The difference in the working of GATT and WTO can be seen in their working mechanism and is as GATT had no institutional foundation and followed asset of simple rules and policies whereas WTO is a permanent institution with a framework of rules and policies along with a Secretariat (Collins and Rodrik, 2001). The rules and policies adopted by GATT was applicable on goods which were traded whereas WTO adopted rules and policies which was applicable on traded goods, traded services and even on intellectual property rights (Baldwin, 2010). GATT was formed through a multilateral agreement where different countries joined at different times resulting in a fragmentation of the trading system whereas WTO was undertaken at a single undertaking where all the member countries became signatories to it and entered into different multilateral agreements which is binding on all (Broadman, 2005). GATT had little or no power with regard to the settlement of disputes which arose among the member countries thereby delaying the process of solving conflicts whereas WTO has a set of rules and look towards resolving the disputes among the member countries so that an environment to facilitate international trade can be developed (Brown, 2009). GATT with regard to powers was limited and had little powers to take different decisions whereas WTO has high powers and is capable of solving different issues from itself GATT was characterized by parties entering into mutual agreement with one another and carrying on trade with that respective country whereas WTO looks towards mutual consensus and aims towards developing policies which would help to liberalize international trade (Blanchard, Olivier, Kenneth and Jeffrey 2004). The member of GAAT were members on a provisional basis whereas in case of WTO the agreement between the members is on a legal permanent provision which has thereby helped in formulating policies through which enhancement of international trade had become possible. Thus widespread differences between the manner in which GATT and WTO works is being highlighted. It is seen that both the institutions were developed with the objective of fostering international trade but WTO is vested with more powers as compared to GAAT which thereby helps to improve the manner in which different decisions are taken. 5.0 Conclusion The report thereby brings forward the manner in which GAAT and WTO works. It shows the reason for both GAAT and WTO be created and differences which exist among both the institutions. The report also shows that international trade has flourished after the setting up of institutions and would further help to improve business. The enactment of WTO has helped to ensure that the disputes which were present among the member countries gets solved and has thereby fostered an environment where better trade can be generated. On the whole the creation of different institutions has helped international trade, reduced tariffs, protectionism and created an environment where different economies trade with one another so that the larger interest of the society and the stakeholders can be protected. 6.0 References Baldwin, R. (2010). Sources of the WTO’s Woes: Decision-Making’s Impossible Trinity. Policy Insight no. 49, Geneva: Centre for Economic Policy Research Blanchard, T., Olivier, J., Kenneth A. and Jeffrey D. (2004). eds. The Transition in Eastern Europe (Volumes 1 and 2). National Bureau of Economic Research Project Report. Chicago: University of Chicago Press Brown, P. (2009). Antidumping, Safeguards, and Protectionism During the Crisis: Two New Insights From 4th Quarter 2009. Vox, May 1, 2014, http://www.voxeu.org/index.php?q=node/4635 Broadman, H (2005). From Disintegration to Reintegration: Eastern Europe and the Former Soviet Union in International Trade. Washington, D.C.: World Bank Collins, S. and Rodrik, D. (2001). Eastern Europe and the Soviet Union in the World Economy. Washington, D.C.: Institute for International Economics Cuyvers, L., Philippe De, L., and Stijn, V. (2005). From AFTA Towards an ASEAN Economic Community… and Beyond. Discussion Paper no. 46. Antwerp: Centre for ASEAN Studies, 2005. Dadush, Uri. (2009). WTO Reform: The Time to Start Is Now. Policy Brief no. 80. Washington, D.C.: Carnegie Endowment for International Peace Dadush. U, and Bennett, S. (2010). The World Order in 2050. Policy Outlook. Washington, D.C.: Carnegie Endowment for International Peace. Read More