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PROJECT REPORTON

GENERAL AGREEMENT ON TARIFFS AND TRADE

Submitted To:

Dr. Shekhar DasFaculty Member

IMS GHAZIABAD

Submitted By:

VIBHAV GUPTA (BM010163)

INSTITUTE OF MANAGEMENT STUDIES C-2 38, Buladshahr Road, Lal Quan, Ghaziabad -201009,

Website: www.ims -g haziabad.ac.in


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INTRODUCTION

The General Agreement on Tariffs and Trade (typically abbreviated GATT ) wasnegotiated durin g the UN Conference on Trade and Employment and was the outcome of

the failure of ne gotiatin g governments to create the International Trade Or ganization (ITO). After World War II, the allies, most notably the United States, wanted the major nations, of the world to recover from the effect of the war as fast as possible. To ensurethis, the followin g three major steps were made, their main purpose bein g were toliberalize international trade and payment. Plans for a cross national system -, and standard of payment were instituted. To ensure

the proper functionin g of such a standard a financial or ganization was created,called the International Monetary Fund, commonly abbreviated as the IMF.

As a result of the War, European countries and Japan had their infrastructuredevastated. These countries were in desperate need of additional investments andcapital to rebuild their factories and production plants. To ensure the free flow of capital, the International Bank for Reconstruction and Development (abbreviatedas IBRD, now called World Bank) was established.

Free trade was to be overseen by the International Trade Or ganization, abbreviatedas ITO, which was also born durin g this time.

The General A greement on Trade and Tariffs (abbreviated as GATT) as drawn up and

agreed to durin g an international conference at Geneva, Switzerland, which was held in1947. GATT served as the draft charter for the ITO. The US started ne gotiations with 22 countries, resultin g in the by these countries to the re gulation of 45,000 tariff rates.GATT was officially launched on January 1, 1948, by the si gnature of 23 contractin g parties. The United States Congress, however, in 1950 did not ratify GATT, which was toestablish the ITO

Major GATT Provisions

Tariffs

All si gning parties of GATT were obli gated to utilize a non -discriminatory, most favorednation treatment (MFN) to all other contractin g parties re gardin g tariffs.


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Exceptions Existin g tariffs. One example for this was between those of the British Commonwealth

(these were nations formerly under colonialist rule).

In the event of a threat of serious dama ge to domestic producers of a GATT country,GATT provided an escape clause to that contractin g party.

Q uantitative Restrictions

GATT generally prohibits quantitative import and export restrictions.

Exceptions Agriculture - when a government needs to remove surplus of a gricultural -, and

fisheries products. An example for this is the US.

Balance of payments ensurin g the balance of payments. Important when the forei gnexchan ge reserve of a country is low.

Developin g countries LD Cs are allowed the use of import quotas to protect anddevelop their infant industries.

National Security Certain export products need strate gic controls.

Patents, Copyrights, Public Morals.

Special Provisions to enhance the development of the Trade of Developing Countries

As of 1965, the contractin g parties added Part IV (Trade and Development) to theAgreement. GATT gives hi gh priority to reduction/elimination of tariffs on products of LD Cs.

To refrain from introducin g tariffs and NTBs to such imports.

To refrain from imposin g internal taxes to discoura ge consumption of primary productsfrom LD Cs.

Not expectin g reciprocal commitments from LD Cs.

Other Provisions

Provisions eliminatin g concealed protection such as customs valuation. For Example,American Sellin g Price valuation. By ASP, and ad valorem tariff is imposed onthe domestic price.


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Procedure issues: each member is entitled to a sin gle vote, decisions are made bymajority vote (over 50% wins). 2/3 (75%) majority is required to waiveobligations. Settlements of disputes.

Over 100 countries are now GATT contractors. These countries are responsible for about95-90% of world trade.

Accomplishments of GATT

No major, worldwide wars have been incured since 1948 ( Choi: Increased tradepromotes world peace, as members are financially interested in peace).

Establishment of the World Trade Or ganization (WTO) at the Uru guay Round.

GATT held a total of 8 rounds,

Annecy Round - 1949

The second round took place in 1949 in Annecy , France . 13 countries took part in the

round. The main focus of the talks was more tariff reductions, around 5000 in total.

Torquay Round - 1951

The third round occurred in Torquay , England in 1950. Thirty -eight countries took part in

the round. 8,700 tariff concessions were made totalin g the remainin g amount of tariffs to

of the tariffs which were in effect in 1948. The contemporaneous rejection by the U.S.

of the Havana Charter signified the establishment of the GATT as a governin g worldbody.

Geneva Round - 1955-1956

The fourth round returned to Geneva in 1955 and lasted until May 1956. Twenty -six

countries took part in the round. $ 2.5 billion in tariffs were eliminated or reduced.

Dillon Round - 1960-1962

The fifth round occurred once more in Geneva and lasted from 1960 -1962. The talks

were named after U.S. Treasury Secretary and former Under Secretary of State, DouglasDillon , who first proposed the talks. Twenty -six countries took part in the round. Alon g

with reducin g over $4.9 billion in tariffs, it also yielded discussion relatin g to the creation

of the European Economic Community (EEC).

Kennedy Round - 1964-1967


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Kennedy Round took place from 1964 -1967.

Tokyo Round - 1973-1979

Reduced tariffs and established new re gulations aimed at controllin g the proliferation of

non-tariff barriers and voluntary export restrictions. 10 2 countries took part in the round.Concessions were made on $190 billion worth.

Uruguay Round - 1986-1994

The Uruguay Round began in 1986. It was the most ambitious round to date, hopin g to

expand the competence of the GATT to important new areas such as services , capital ,

intellectual property , textiles , and agriculture . 123 countries took part in the round.

Agriculture was essentially exempted from previous a greements as it was given special

status in the areas of import quotas and export subsidies, with only mild caveats.However, by the time of the Uru guay round, many countries considered the exception of

agriculture to be sufficiently glaring that they refused to si gn a new deal without some

movement on a gricultural products. These fourteen countries came to be known as the

"Cairns Group ", and included mostly small and medium sized a gricultural exporters such

as Australia , Brazil , Canada , Indonesia , and New Zealand .

The A greement on A griculture of the Uru guay Round continues to be the mostsubstantial trade liberalization a greement in a gricultural products in the history of tradenegotiations. The goals of the a greement were to improve market access for a gricultural

products, reduce domestic support of a griculture in the form of price -distortin g subsidiesand quotas, eliminate over time export subsidies on a gricultural products and toharmonize to the extent possible sanitary and phytosanitary measures between member countries.

Problems with GATT

GATT has failed in si gnificantly liberalizin g trade of a gricultural products. This wasone of the major goals at the Uru guay Round.

It has been partially successful in the re gulation of trade practices adopted by member countries in response to BP difficulties. For example, the United States in 1971imposed a 10% additional char ge on its imports, thereby doublin g its avera geduties.

Steady erosion of the MFN principle by the E C. Article 24 permits member countriesto form a CU or a FTA. The E C adopted VILs to keep out a gricultural products,lowered duties to many African and Mediterranean countries, which are not


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extended to other GATT contractin g parties.

GATT condoned mana ged trade for textiles, lar gely due to US pressure, andautomobiles (VERs).

GATT is an executive a greement under the Protocol of Provisional Application. Whatthis means is that the contractin g parties are not obli gated to abide by those rulesthat were inconsistent with their domestic laws at the time of entry of thecontractin g party into GATT. Many countries bypass or sidestep rules andprovisions by deliberately narrowly definin g commodities because of tariff purposes.

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