The General Agreement on Tariffs and Trade, commonly known as GATT, is an international agreement that was signed in 1947. Its purpose was to reduce trade barriers and promote international trade. GATT was replaced by the World Trade Organization (WTO) in 1995, but its principles and rules still form the basis of international trade today.
GATT was created to address the problems that arose during the Great Depression and the World War II. During that time, countries had implemented high tariffs and trade barriers to protect their economies from foreign competition. This resulted in a decline in international trade, which worsened the economic conditions worldwide. GATT aimed to reduce these barriers, and promote free and fair trade between countries.
GATT was based on several principles, including the most-favored-nation (MFN) principle, which stated that any trade concession or benefit granted to one country should be granted to all members of GATT. This principle aimed to promote non-discrimination in international trade.
Another principle of GATT was the reduction of tariffs. Member countries were required to reduce their tariffs on imported goods, which made it easier and cheaper for companies to trade with other countries. This helped promote competition and innovation, resulting in lower prices for consumers.
GATT also prohibited countries from using non-tariff barriers, such as quotas and subsidies, to protect their domestic industries from foreign competition. This ensured that all countries had a fair chance to compete on the global market.
The GATT negotiations were conducted through rounds of talks, where member countries discussed and negotiated trade policies. The most significant of these rounds was the Uruguay Round, which concluded in 1994. This round resulted in the creation of the World Trade Organization and expanded the scope of GATT to cover intellectual property rights and services.
In conclusion, GATT was an essential international agreement that helped create the foundation for modern international trade. Its principles of non-discrimination, tariff reductions, and elimination of non-tariff barriers helped promote free and fair trade between countries. Although GATT has been replaced by the WTO, its principles and rules continue to guide international trade today.