a presentation on gatt
TRANSCRIPT
Introduction – History of GATT Objectives The GATT Rounds Exceptions and waivers Reasons For Exclusion of Agriculture Gatt Rounds between 1947 – 1994 Present formation of GATT GATT passed or failed
Degree of openness of the economy to the penetration of foreign goods and services
1700 - A country grew rich by the amount of gold it received and sold in the foreign market
1800 – Adam Smith and David Ricardo challenged the mercantilist view.
Law of comparative advantage international laissez faire
The US governing class held long and hard to protectionism
1930 – Great Depression High unemployment and depression in
export Tariff rates raised to draconian level A trade war leading to the total collapse
of international trade
The realignment occurred between Great Britain and the US
The Bretton Woods Conference created the International Monetary Fund
World Bank for economic restructuring and development in western Europe
The General Agreement on Trade and Tariff was created in 1946
Initial purpose is substantial reduction of tariffs and other trade barriers and the elimination of preferences
It was founded on the principles of nondiscrimination and multilateralism in international trade
It was lauded for the dramatic increase of the world trade
An agreement for trade between 150 countries
France Germany Spain Italy USA
1913 20% 13% 41% 18% 44%
1925 21% 20% 41% 22% 37%
1931 30% 21% 63% 46% 48%
The outcome of the failure of negotiating governments to create the International Trade Organization
The objective was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements
The functions of the GATT were taken over by the World Trade Organization
The objectives of the 1947 Agreement were to establish an orderly and transparent framework within which barriers to trade could be gradually reduced, and international trade thereby expanded
The most important elements of the Agreement included those of: non-discrimination: the Most Favored Nation (MFN)
principle protection shall be afforded to domestic industries consultation shall be the primary method to solve
global trade barriers tariff reduction.
Year Place/Name Topics Covered Counries
1947 Geneva(Switzerland) Tariffs 23
1949 Annecy(France) Tariffs 13
1951 Torquay(UK) Tariffs 38
1956 Geneva Tariffs 26
1960-61 Geneva(Dillon Round) Tariffs 26
1964-67 Geneva(Kennedy Round)
Tariffs and anti-dumping measures 62
1973-79 Geneva(Tokyo Round) Tariffs ,non-tariff measures, “framework” agreements
102
1986-94 Geneva(Uruguay Round)
Tariffs, non tariffs measures, rules, services, intellectual property, dispute
settlement, textiles, agriculture, creation of WTO etc.
123
Developing countries were given special status.
Countries that offer each other more favorable treatment within a custom's union were allowed to waive full adherence to the MFN clause.
Agricultural trade was given special treatment, especially with regard to non-tariff barriers.
The general consensus of opinion was that agriculture was a unique sector of the economy, that, for reasons of national food security, could not be treated like other sectors.
With the expansion of the manufacturing economy, agriculture was in relative decline. Political and social pressures demanded, however, that the decline be halted or slowed down, and that agriculture be protected from the full rigors of the international market.
1947: Geneva Round – Participants completed 123 negotiations and
established 20 schedules containing the tariff reductions
The Agreement covered some 45,000 tariff concessions and about $10 billion in trade
First Round was successful since the US was .. – enthusiastic for free trade – was willing to cut its tariffs on imports from
Europe – did not put pressure on European countries to
abandon their trade restrictions
Denmark Holland USA France Austria UK Italy Germany
1950 3% 11% 14% 18% 18% 23% 25% 26%
Table: Average tariff rates in selected countries on manufactured products
main focus of the talks was more tariff reductions Agreement that the accession of a new member country does not require unanimity, but only two-third majority of all existing member countries
The contemporaneous rejection by the United States of the Havana Charter signified the establishment of the GATT as a governing world body
8700 concessions were made Major problem of that Round: Dispute
between the US and the UK => no bilateral tariff cuts on US—UK trade
$2.5 billion tariffs were eliminated or reduced.
The momentum toward lower tariffs was lost
Low-tariff countries were frustrated by their inability to bargain effectively with high-tariff countries
Along with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the creation of the European Economic Community (EEC)
Last round of negotiations which were undertaken on a bilateral basis:
– The Most favoured nation principle ensured that all member countries were granted with all trade advantages. In effect, that means no nation will be treated worse than another.
Denmark Holland Austria France UK Italy Germany
1950 3% 11% 18% 18% 23% 25% 26%
1958 6% 10% 15% 17% 17% 19% 6%
Round resulted in 4,400 tariff concessions covering $4.9 billion of trade. tariff rates on manufactured goods came down sharply (e.g. common external tariff of the EEC fell to 10.4% in 1968)
Agricultural and textile sectors were still not considered
Concessions were made on $40 billion worth of tariffs
The US suggested… – Reduction of tariffs across the board by 50% (linear rule) – “dominant supplier authority”: On commodities in which the US and
the European Community (EC) accounted for 80% or more of the world trade, tariffs should be cut by up to 100%
– US offered that tariffs for tropical products and tariff rates of less than 5% should be completely eliminated, provided that the EC reciprocated
US suggestions were phrased in a non-discriminatory manner, but naturally guided by self-interest
Sectoral groups for the discussion of five sensitive product sets were created: Aluminums, chemicals, paper and pulp, steel, textiles and clothing
– This allowed more scope for lobbying by producer interest groups
Kennedy Round was successful: tariff protection dropped significantly in manufacturing in the late 1960s and early 1970s – Tariffs reductions in industrial countries were
estimated to be between 36-39% – Tariff reductions affected 75% of world trade – As a result of Kennedy Round, the CET of the
European Community fell to 6.6%. Tariff cuts on raw materials, textiles and
clothing were much lower Agriculture was by an large left out from tariff
cuts
Concessions were made on $190 billion worth. Tokyo Round was much concerned with
commercial policy rules: set-up of several study groups
– Group: How to deal with non-tariff barriers (Technical barriers; quantitative restrictions; subsidies
– Other groups: How to deal with tariffs; agriculture; tropical products; safeguards (i.e. emergency protection)
The “Swiss formula”: – where t0= original tariff and t1 = final tariff
(both in percentage terms) – Negotiations resulted in the value of c being set
at 16 – Examples: t0 = 10% => t1 = 6.2% t1=
ct0 t0 = 20% => t1 = 8.9%
c +t0
One-third cut in customs duties in the world's nine major industrial markets, bringing the average tariff on manufactured products down to 4.7 per cent
Pre - Tokyo Post -Tokyo Reduction
Total Industrial product 7.2% 4.9% 33%
Raw Material 0.8% 0.4% 52%
Semi-Manufacturers 5.8% 4.1% 30%
Finished Manufacturers 10.3% 6.9% 33%
Textiles, clothing, travel goods received lower tariff cuts
Agriculture received attention, but was by an large left out from tariff cuts and continued to be a source of friction in the 1980s
Concessions for the import of tropical products: Many were granted duty free access
Developing countries failed to achieve greater concessions and remained dissatisfied
Period following the Tokyo Round – World-wide recession – Trade conflicts between three major trading
blocs: US, EC, Japan – US-EC trade disputes centered on
agricultural issues (EC became exporter) – US wanted Japan to open its domestic
market for US exports – EC wanted to limit Japanese export growth
Japan favored a new GATT round: Multilateral negotiations were preferred to
bilateral pressure from the US and the EC
Objective Reduce the agriculture subsidies Put restriction on foreign investment To begin the process of open trade in banking and
insurance
Agenda:Tariffs, Non-Tariff Measures, National
Resource products, Textile and clothing, agriculture, Tropical products, Gatt articles, Tokyo Round codes, Anti- Dumping, Subsidies, Intellectual Property, Investment measures, Dispute settlement, The Gat system, Services
Agreement on agriculture Agreement on textile and clothing Agreement on Technical Barriers to
Trade Agreement on Trade Related Aspects
of Investment Measures Agreement on Import Licensing
Procedures
WTO replaced The 75 existing GATT members and the
European Communities became the founding members of the WTO
A total of 153 member countries in the WTO.
It expanded its scope from traded goods to trade within the service sector and intellectual property rights.
Continual reductions in tariffs alone helped spur very high rates of world trade growth
Limited achievement of the Tokyo Round, outside the tariff reduction results, was a sign of difficult times to come
General Agreement was no longer as relevant to the realities of world trade
Agriculture sector was deeply upset
Thank YouBy
Vinod Menon & Ruchit RajenPGDM Module – II
SEC - A