What are the important Differences and Similarities between GATT and WTO

Recently updated on August 20th, 2023 at 02:02 pm

General Agreement on Tariffs and Trade (GATT)

What is the GATT and its purpose?

The General Agreement on Tariffs and Trade (GATT) was a multilateral international trade agreement established in 1947 with the primary goal of promoting international trade by reducing trade barriers, such as tariffs and quotas, and by providing a framework for negotiating trade agreements among member countries. GATT served as the foundation for the modern international trading system and played a crucial role in promoting economic cooperation and stability after World War II.

Purposes and Features of the GATT:

Tariff Reduction:

GATT aimed to lower and eliminate tariffs on traded goods among member countries to promote free and open trade.

Non-Discrimination:

The principle of non-discrimination was a fundamental aspect of GATT. It required member countries to treat all trading partners equally and not to discriminate between foreign and domestic products.

Negotiation of Trade Agreements:

GATT provided a platform for member countries to negotiate trade agreements and concessions to reduce trade barriers and improve market access.

Trade Rules and Principles:

GATT established rules and principles to govern international trade, including rules against unfair trade practices, safeguards against excessive protectionism, and provisions for trade-related matters.

Dispute Settlement:

GATT introduced a dispute settlement mechanism to resolve trade conflicts among member countries. While not as formalized as the later WTO’s system, GATT provided a foundation for addressing trade disputes.

Trade Liberalization:

GATT contributed to the liberalization of trade and the expansion of global trade flows, leading to increased economic growth and development for member countries.

Most-Favored-Nation (MFN) Principle:

GATT included the MFN principle, which required member countries to extend any trade concession or privilege granted to one country to all other member countries. This principle promoted equal treatment and nondiscrimination.

Trade Rounds:

GATT conducted a series of trade negotiation rounds, known as “trade rounds,” where member countries negotiated reductions in tariffs and other trade barriers. The most famous of these rounds was the Uruguay Round, which led to the creation of the World Trade Organization (WTO).

Promotion of Peace and Stability:

GATT aimed to promote economic cooperation and international trade as a means to foster peaceful relations among member countries and prevent future conflicts.

Is GATT still in Effect?

The General Agreement on Tariffs and Trade (GATT) as a standalone agreement is no longer in effect. It was replaced by the World Trade Organization (WTO), which came into existence on January 1, 1995. The GATT 1947, which was the original version of the agreement, ceased to exist with the establishment of the WTO.

The WTO built upon the foundation of GATT and expanded its scope to cover a broader range of trade-related issues beyond just goods, including services, intellectual property, and trade-related aspects of investment. The WTO also introduced a more formalized dispute settlement mechanism and a stronger institutional framework.

While GATT as a standalone agreement is no longer in effect, many of its principles and provisions were incorporated into the agreements of the WTO. The WTO’s agreements are based on the GATT principles of non-discrimination, trade liberalization, and dispute resolution. As such, the principles and commitments of GATT continue to influence international trade relations through the framework of the WTO.

How Many Countries were in GATT?

The General Agreement on Tariffs and Trade (GATT) began with 23 original contracting parties when it was established in 1947. Over the years, the number of contracting parties grew as more countries joined the agreement. By the time GATT was replaced by the World Trade Organization (WTO) in 1995, there were 128 contracting parties.

It’s important to note that the GATT was a dynamic agreement, and countries could accede to it at different times. The GATT’s expansion reflected the growing recognition of the benefits of international trade cooperation and the desire of many countries to participate in a rules-based trading system.

With the establishment of the WTO in 1995, the GATT’s contracting parties became founding members of the new organization, and the WTO’s membership has continued to grow over the years. As of my knowledge cutoff date in September 2021, the WTO had 164 member countries. Please note that membership numbers may have changed since then.

World Trade Organization (WTO)

The World Trade Organization (WTO) is an international organization that oversees and regulates international trade among its member countries. It was established on January 1, 1995, succeeding the General Agreement on Tariffs and Trade (GATT). The WTO serves as a forum for negotiation, dispute resolution, and the establishment of trade rules to promote smooth and predictable global trade relations.

Functions and features of the WTO:

Trade Agreements:

The WTO administers a set of trade agreements negotiated and signed by its member countries. These agreements cover various aspects of international trade, including goods, services, intellectual property, and trade-related aspects of investment.

Non-Discrimination:

The principle of non-discrimination is a cornerstone of the WTO. Member countries are expected to treat other member countries equally and not discriminate between foreign and domestic products.

Tariffs and Trade Barriers:

The WTO aims to reduce and eliminate tariffs (taxes on imports) and other trade barriers to promote free and open trade.

Dispute Settlement:

The WTO provides a mechanism for resolving trade disputes among member countries. Dispute settlement panels make rulings that are binding and enforceable.

Trade Policy Review:

The WTO conducts regular reviews of the trade policies and practices of its member countries, promoting transparency and understanding of each country’s trade policies.

Technical Assistance and Capacity Building:

The WTO provides technical assistance and training to help developing countries participate effectively in international trade negotiations and implement trade-related policies.

Trade Facilitation:

The WTO works to simplify and streamline customs procedures and trade-related processes to make cross-border trade more efficient.

Intellectual Property:

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) establishes international standards for the protection of intellectual property rights.

Market Access:

The WTO seeks to improve market access for goods and services, facilitating increased trade between member countries.

Development Goals:

The WTO places emphasis on the needs and interests of developing countries, aiming to ensure that trade contributes to economic development and poverty reduction.

Objectives of WTO

The World Trade Organization (WTO) has a set of core objectives that guide its functions and activities in overseeing international trade relations among its member countries.

Promote Free and Fair Trade:

The WTO aims to promote and facilitate the smooth flow of goods, services, and investments across borders by reducing trade barriers, such as tariffs and quotas, and ensuring non-discriminatory treatment of member countries.

Prevent Protectionism:

The WTO seeks to prevent member countries from resorting to protectionist measures, such as unfair trade practices, subsidies, and discriminatory policies that distort international trade.

Create Predictable and Stable Trade Environment:

The WTO provides a rules-based framework for international trade, helping to create a predictable and stable environment that encourages trade and investment.

Facilitate Negotiations:

The WTO serves as a forum for negotiations among member countries to reach agreements on various trade issues, including tariffs, market access, and trade-related aspects of intellectual property.

Ensure Non-Discrimination:

The principle of non-discrimination is a fundamental objective of the WTO. It aims to ensure that member countries do not discriminate between foreign and domestic products, treating all trading partners equally.

Settle Trade Disputes:

The WTO provides a mechanism for resolving trade disputes among member countries through a structured and impartial dispute settlement process. This helps prevent trade conflicts from escalating into trade wars.

Promote Transparency:

The WTO encourages transparency in trade policies and practices by requiring member countries to provide information about their trade regulations, policies, and practices.

Assist Developing Countries:

The WTO is committed to assisting developing countries in integrating into the global trading system and benefiting from international trade. It provides technical assistance, capacity building, and special treatment to help them participate effectively in trade.

Support Economic Growth and Development:

The WTO recognizes the role of trade in promoting economic growth, job creation, and development. It aims to ensure that trade contributes positively to the economic well-being of member countries.

Protect Intellectual Property Rights:

The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) aims to establish international standards for protecting intellectual property rights and promoting innovation.

Promote Sustainable Development:

The WTO seeks to reconcile trade and environmental concerns to promote sustainable development, ensuring that trade practices do not harm the environment.

Why WTO Replaced the GATT?

The World Trade Organization (WTO) was established to replace the General Agreement on Tariffs and Trade (GATT) with the aim of addressing limitations and shortcomings of the GATT framework.

Comprehensive Coverage:

Unlike GATT, which primarily focused on the regulation of tariffs and trade in goods, the WTO’s mandate includes a broader range of trade-related issues, such as services, intellectual property, and trade-related aspects of investment. This expansion allowed the WTO to address new and emerging challenges in the global trading system.

Legal Status:

GATT was not a formal international organization but rather a provisional agreement. The establishment of the WTO as a permanent international organization with legal personality provided a more stable and robust framework for addressing trade-related issues and resolving disputes.

Dispute Settlement Mechanism:

The WTO introduced a more effective and binding dispute settlement mechanism compared to GATT. The WTO’s Dispute Settlement Body (DSB) has the authority to make binding rulings on trade disputes, which enhanced the credibility and enforceability of the trade rules.

Institutional Framework:

The WTO has a more structured and comprehensive institutional framework than GATT. This framework includes specialized committees, working groups, and a more formalized decision-making process, which allows for better coordination and implementation of trade agreements.

Modernization:

The establishment of the WTO allowed for the modernization and updating of trade rules to reflect changes in the global economy, technology, and trade practices. This flexibility was crucial in addressing new trade issues and challenges.

Enforcement and Compliance:

The WTO introduced a mechanism for ensuring compliance with trade rules and agreements. Members are required to regularly submit trade policies and practices for review, promoting transparency and accountability.

Development Focus:

The WTO placed a stronger emphasis on the interests and concerns of developing countries. It introduced special and differential treatment provisions to help developing countries integrate into the global trading system and benefit from trade.

Multilateralism:

The establishment of the WTO reinforced the multilateral trading system and the importance of a rules-based approach to international trade. It provided a platform for negotiations, cooperation, and resolution of trade disputes among a larger and more diverse group of member countries.

Important differences between WTO and GATT

Aspect WTO GATT
Formation Established in 1995 Established in 1947
Legal Status International organization Multilateral trade agreement
Scope Broader trade issues Primarily tariffs on goods
Dispute Settlement Formalized mechanism Informal dispute panels
Institutional Framework Structured organization Limited institutional structure
Coverage Services, IP, investments Mainly trade in goods
Agreements Multiple agreements Single multilateral agreement
Trade Rounds Conducted under WTO Conducted under GATT
Binding Decisions Decisions are binding Decisions were not binding
Membership WTO has more members GATT had fewer members
Intellectual Property Includes TRIPS agreement Limited IP provisions
Sustainable Development Emphasizes development Primarily trade expansion

Similarities between WTO and GATT

Trade Regulation:

Both WTO and GATT aim to regulate international trade and promote cooperation among member countries to facilitate the exchange of goods and services.

Trade Liberalization:

Both organizations are committed to reducing trade barriers, including tariffs and quotas, to promote free and open trade.

Non-Discrimination:

Both WTO and GATT emphasize the principle of non-discrimination, requiring member countries to treat all trading partners equally and avoid discriminatory trade practices.

Negotiation Forums:

Both organizations provide platforms for member countries to negotiate and discuss trade agreements, concessions, and trade-related issues.

Dispute Settlement:

While the dispute settlement mechanism of the WTO is more formalized, both WTO and GATT include provisions for resolving trade disputes among member countries.

Trade Rounds:

Both WTO and GATT have conducted trade negotiation rounds to address various trade issues and negotiate trade concessions among member countries.

Trade Policy Reviews:

Both organizations conduct regular reviews of member countries’ trade policies and practices to promote transparency and understanding.

Development Focus:

Both WTO and GATT recognize the interests of developing countries and aim to ensure that trade contributes to their economic development and well-being.

Market Access:

Both organizations work to improve market access for goods and services, facilitating increased trade between member countries.

Rules-Based System:

Both WTO and GATT operate within a rules-based system that provides a framework for international trade relations and ensures a level playing field for all members.

Membership Expansion:

The WTO’s membership includes most countries that were part of GATT, indicating continuity and inclusivity.

Principles and Commitments:

Many of the principles and commitments established under GATT were carried forward and incorporated into the WTO’s agreements.

Advisory Note: Article shared based on knowledge available on internet and for the Knowledge purpose only. Please contact Professional/Advisor/Doctor for treatment/Consultation.

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