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Introduction

The General Agreement on Tariffs and Trade(GATT) was a multilateral agreement

regulating international trade. According to its preamble, its purpose was the

"substantial reduction of tariffs and other trade barriers and the elimination of

preferences, on a reciprocal and mutually advantageous basis." It was negotiatedduring the United ations!onference on Trade and mployment and was the outcome

of the failure of negotiating governments to create theInternational Trade

#rgani$ation(IT#). %ATT was signed in &', too* effect in &'+, and lasted until

&'' it was replaced by the -orld Trade #rgani$ationin &''.

The original %ATT te/t (%ATT &') is still in effect under the -T# framewor*, sub0ect

to the modifications of %ATT &''.

1efination

%eneral Agreement on Tariffs and Trade

a multilateral international treaty signed in &' to

promote trade, by means of the reduction andelimination of tariffs and import 2uotas re

placed in &'' by the -orld Trade #rgani$ation

http://en.wikipedia.org/wiki/United_Nationshttp://en.wikipedia.org/wiki/International_Trade_Organizationhttp://en.wikipedia.org/wiki/International_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organizationhttp://en.wikipedia.org/wiki/United_Nationshttp://en.wikipedia.org/wiki/International_Trade_Organizationhttp://en.wikipedia.org/wiki/International_Trade_Organizationhttp://en.wikipedia.org/wiki/World_Trade_Organization

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Rounds of GATT

%ATT held a total of nine rounds,

GATT and WTO trade rounds

Name Start Duration CountriesSubjectscovered

Achievements

Geneva April &' months 34 Tariffs

5igning of%ATT, ,666tariffconcessionsaffecting 7&6

billion of trade

Annecy April &'' months &4 Tariffs !ountriese/changedsome ,666tariff

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concessions

Torquay5eptember

&'6+ months 4+ Tariffs

!ountries

e/changedsome +,66tariffconcessions,cutting the&'+ tarifflevels by 38

Geneva

9anuary&':

months 3:Tariffs,admission of

9apan

73. billion intariff reductions

Dillon5eptember

&':6&&

months3: Tariffs

Tariffconcessionsworth 7.'billion of worldtrade

!ennedy ;ay &':4

months:3

Tariffs,Anti, because, as the

higher tariffs would apply to every country, the interests of AGs principal ally ! might

get impaired.

As ;@ clauses promote non

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Exceptions

%ATT members recogni$ed in principle that the "most favoured nation" rule should be

rela/ed to accommodate the needs of developing countries, and the U !onference on

Trade and 1evelopment (established in &':) has sought to e/tend preferentialtreatment to the e/ports of the developing countries.

Another challenge to the "most favoured nation" principle has been posed by

regional trade bloc*s such as the uropean Union and the orth American @ree Trade

Agreement (A@TA), which have lowered or eliminated tariffs among the members

while maintaining tariff walls between member nations and the rest of the world. Trade

agreements usually allow for e/ceptions to allow for regional economic integration.

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Specific countries' policies

#nited States&

In the &''6s, continued "most favoured nation" status for the ?eopleGs Cepublic of

!hina by the United 5tates created controversy because of its sales of sensitive military

technology. !hinaGs ;@ status was made permanent on 1ecember 3, 366&. All of theformer 5oviet states, including Cussia, were granted ;@ status in &'':. #n a bilateral

level, however, the United 5tates could not grant ;@ status to some members of the

former 5oviet Union, including the Cussian @ederation, because of the 9ac*soniden, the 9ac*son

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!ongress passes (and avoids or overturns a presidential veto of) a disapproval

resolution.

3uro4ean #nion&

The current U competition law position is that ;@ clauses will infringe Article &6&(i) if

in the individual circumstances of the case they result in an appreciable adversely effect

on competition in the uropean Union. This is li*ely to happen when the parties to the

agreement have substantial mar*et power.

It is recognised by U courts and regulators that such clauses are widely used in a

number of industries including most topically with online travel agents. Bowever the

regulatory tide in the U appears to be turning against the use of these clauses. In a

number of recent U cases in the UF and %ermany, ;@s have been condemned

when used by companies with significant mar*et power.

In 9anuary 36&, the UF competition regulator, the #ffice of @air Trading (N#@TO)

accepted binding commitments from leading onoo*ing.com to alter the way they operated their ;@ clauses with a ma0or hotel chain

International Botel %roup. The decision is being appealed by the price comparison

website 5*yscanner, and supported by online travel agent, 5*oosh.

ndia&

;@ status to >angladesh, and ?a*istan.

5a"istan&

?a*istan had committed in the past that it would grant ;@ status to India. Bowever

there are increasing calls in ?a*istan to grant the ;@ status to !hina. 1uring the

negotiations for the 7:.: billion bailout pac*age from the International ;onetary @und

(I;@), ?a*istan had given an underta*ing that it would ta*e positive steps to grant ;@

status to ew 1elhi.

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n contract la!

A most favoured nation clause(also called a most favoured customer

clauseor most favoured licensee clause) is a contract provision in which a seller (or

licensor) agrees to give the buyer (or licensee) the best terms it ma*es available to any

other buyer (or licensee). In some conte/ts, the use of such clauses may become

commonplace, such as when online eboo* retailers contract with publishers for the

supply of e

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Did GATT Succeed?

Given its provisional nature and limited field of action, the success of GATT in promotin& andsecurin& the liberaliation of much of world trade over 3; years is incontestable% +ontinualreductions in tariffs alone helped spur very hi&h rates of world trade &rowth - around 7 per cent a

year on avera&e - durin& the 12)*s and124*s% And the momentum of trade liberaliation helpedensure that trade &rowth consistently out-paced production &rowth throu&hout the GATT era% Therush of new members durin& the /ru&uay

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How is the WTO different from GATT?

The World Trade Or&aniation is not a simple e=tension of GATT@ on the contrary, it completelyreplaces its predecessor and has a very different character% Amon&

the principal differences are the followin&>

The GATT was a set of rules, a multilateral a&reement, with no institutional foundation, only asmall associated secretariat, which had its ori&ins in the attempt to establish an "nternationalTrade Or&aniation in the 123*s% The WTO is a permanent institution with its own secretariat%

The GATT was applied on a provisional basis even if, after more than forty years, &overnmentschose to treat it as a permanent commitment% The WTO commitments are full and permanent%

The GATT rules applied to trade in merchandise &oods% "n addition to &oods, the WTO coverstrade in services and trade-related aspects of intellectual property%

While GATT was a multilateral instrument, by the 127*s many new a&reements had been addedof a plurilateral, and therefore selective, nature% The a&reements, which constitute the WTO, arealmost all multilateral and, thus, involve commitments for the entire membership%

The WTO dispute settlement system is faster, more automatic, and thus much less susceptible toblocka&es, than the old GATT system% The implementation of WTO dispute findin&s will also bemore easily assured%

The GATT 123; will continue to e=ist until the end of 122), thereby allowin& all GATTmember countries to accede to the WTO and permittin& an overlap of activity in areas like

dispute settlement% #oreover, GATT lives on as GATT 1223, the amended and up-datedversion of GATT 123;, which is an inte&ral part of the WTO A&reement and which continues toprovide the key disciplines affectin& international trade in &oods

While GATT was a multilateral instrument, by the 127*s many new a&reements hadbeen added of a plurilateral, and therefore selective, nature% The a&reements, whichconstitute the WTO, are almost all multilateral and, thus, involve commitments for theentire membership%

The WTO dispute settlement system is faster, more automatic, and thus much lesssusceptible to blocka&es, than the old GATT system% The implementation of WTOdispute findin&s will also be more easily assured%The GATT 123; will continue toe=ist until the end of 122), thereby allowin& all GATT member countries to accede tothe WTO and permittin& an overlap of activity in areas like dispute settlement%#oreover, GATT lives on as GATT 1223, the amended and up-dated version ofGATT 123;, which is an inte&ral part of the WTO A&reement and which continues to

provide the key disciplines affectin& international trade in &oods%

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Why GATT converted to WTO?

GATT rules discriminated a&ainst developin& countries under the &arb of clausessuch as Bescape clausesC,Bsafe&uard rulesC, Bvoluntary e=port restraintsC, Borderlya&reementsC%

DA&ricultureE was treated as a special case thus escapin& GATT rules%

Thou&h developed countries removed ma?ority of tariff barriers yet some othersstill remained affectin& the interests of developin& countries%

/S and 88+ had concluded several bilateral, discriminatory and restrictivearran&ements outside GATT rules%

BSafe&uardsC rules under GATT undermined the effective workin& of GATT%

+ustoms union and free trade areas permitted under GATT had been distortedand abused%

Thou&h GATT was a mandatory body, it lacked enforcin& mechanism%

Fast but not the least, with the emer&ence of more and more new developin&countries, it was felt that GATT rules devised half a century a &o had outlined theirutility%

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