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GATT - General Agreement of Tariffs and Trade

Articles > GATT - General Agreement of Tariffs and Trade

There might have been some resistance to naming the post World War Two liberalisation of trade after the Cuban capital but fortunately, the Havana Charter, signed in 1947 never got off the ground sparing capitalists a few blushes.

Its successor, the General Agreement of Tariffs and Trade (GATT) which came into being later in 1947, was never intended to fulfil the role it later took on. The driving force behind the process were the governments of the UK and USA wanted to remove the protectionist policies which had remained in force throughout the world since the world wide slump in the 1930's it was envisaged that this would be a relatively simple step.

At the same time as GATT came into being, the IMF and World Bank were also created in order to create stability in the post war world. Unfortunately, GATT was not as well thought out as its other Bretton Woods cousins. As the number of participants in the organisation grew and the volume of trade expanded at such a rate throughout the first few decades of the post war period, the structure of GATT wasn't able to keep pace with the requirements that were thrust upon it. It was eventually replaced by the purpose built World Trade Organisation based in Geneva.

Despite the limitations inherent in its foundation, the much-maligned GATT achieved a great deal in a relatively short amount of time. The original round of negotiations among the 23 founder members reduced tariffs on goods amounting to approximately one fifth of world trade. Although there were other reforms as the process gathered momentum, there has never been as sustained a bout of tariff cutting as the world experienced due to GATT in the aftermath of Wold War Two. Subsequent negotiations have since then always been conducted multi-laterally in "rounds". This allows countries to trade different elements of liberalisation for benefits from another economic arena, allowing governments to "sell" the advantages of free trade to their domestic constituents, even if certain reforms might bring short term hardship in a particular sector.

The multi-lateral approach to trade negotiation was not something that had really been attempted before the post war period but after 1945 it became essential. Distortions of trade due to agricultural tariffs or quotas made between two countries were clearly able to have an impact on the whole world. It was GATT that brought countries together in a world forum for the first time to try to resolve disputes and bring about reform.

After the initial successes, GATT gradually lost its effectiveness. Whether this is due to institutional failings or the increased protectionism of governments as world trade slowed in the 1970's is a matter for academic debate. What is clear is that during the first part of its existence, GATT provided a much needed boost to the world economy by liberalising trade. It is now up to its successor organisation, the WTO to improve on the reforms that GATT gave birth to.

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