Gatt Essay Research Paper General Agreement on

Gatt Essay, Research Paper

General Agreement on and Trade (GATT), a provisional and largely voluntary agreement for the reduction of barriers to world trade, entered into by virtually all important trading nations is the major player in the US view of international business. Negotiated in 1947 at Geneva, Switzerland, among 23 countries, GATT came into force on Jan. 1, 1948. By 1983, 90 nations were full members of GATT, and 23 nations had limited membership. The signatories, as well as members under special or provisional terms, include the United States, the British Commonwealth countries, most countries of Western Europe, Eastern European nations, including Poland, Czechoslovakia, and Yugoslavia, and a number of Latin American, African, and Asian countries such as Japan, India, and Pakistan. These countries together account for more than 80 percent of the world’s trade. GATT agreements do not affect the political relations of participating countries, nor do they protect them from or other unfavorable trade treatment by fellow participating nations. Trade accords reached by ministers at GATT conferences are subject to final approval by their governments.

During the depression of the 1930’s, the United States pursued a high-policy (Hawley-Smoot Act of 1930) in the hope of increasing domestic production and employment. Cordell Hull, President Franklin D. Roosevelt’s secretary of state, recognized that high were hindering rather than helping recovery. His efforts to secure a reversal brought about the Trade Agreements Act of 1934, which delegated to the president the authority to make bilateral cutting agreements. The Hull program was extended periodically through the 1940’s. By the end of World War II it was evident that bilateral agreements had serious limitations. Imports were used as a threat against the use of by other countries, and concessions were withheld for fear that nonreciprocating nations might derive benefit from them. A multilateral approach was needed, and the United States took the initiative toward that end in the development of GATT.

Functions of GATT

GATT has three essential features: schedules of concessions; a code of principles and rules governing imports and exports; and periodic meetings that provide an forum for discussing trade problems (Focus, 1994).

Concessions may maintain or eliminate import duties and preferences. The schedules of concessions include more than 60,000 items, embracing the greatest part of all world trade. Negotiations begin bilaterally on a product-by-product basis and become multilateral as they are combined to form the schedule of concessions of all the participating nations.

The principles and rules of GATT safeguard the concessions and supplement them by relaxing such other barriers to trade as import fiscal taxes, and administrative regulations. GATT’s provisions affirm the most-favored-nation treatment by the US (the granting to all nations whatever terms are given to the most favored) in customs, and tax matters.

Advances in trade have resulted from periodic GATT meetings. The first meeting at Geneva in 1947-1948 was followed by talks at Annecy, France, in 1949; Torquay, England, in 1951; Geneva in 1956 and again from 1960 through 1962 and from 1964 through 1967. The sixth meeting (1964-1967), generally known as the Kennedy Round, produced an agreement among nearly 50 participating nations. The seventh meeting, held in Tokyo from 1973 through 1979, produced a similar agreement among its 99 participants. This so-called Tokyo Round also provided for special consideration on behalf of developing countries. In line with this goal, GATT had set up a Trade Center in 1964, which was operated after 1968 jointly with the UN Conference on Trade and Development (UNCTAD).

GATT and Trade

In 1948, total world trade was valued at just above $58 billion, with the United States accounting for 34 percent of free world trade (Yearbook, 1956). Japan’s imports exceeded exports by 160 percent. Today, world trade exceeds $4 trillion, the United States has a share of 12 percent, and Japan has a history of major trade surpluses. But one needs to look beyond the numbers to understand some of the economic changes that have occurred.

The Western, industrialized nations have been joined by new players Hong Kong, Singapore, Taiwan and South Korea, who are now industrialized nations in their own right. Other countries have been industrializing (in the Third World) while still others such as China are becoming big trade players. In addition, the Eastern Bloc, has been converted into emerging market economies, eager and ready to enter the world trade field.

Collaborative blocs are emerging among these countries. They range from loose agreements for general collaboration to well defined economic arrangements such as NAFTA and include political structures such as the European Union. These blocs change the way nations deal with each other; for example, negotiators now often talk to bloc representatives rather than to individual countries.

Exchange rates are another area where there has been change. Currency values used to be fixed; now they float. But a key component of exchange rate theory was always that they were the result of international currency demand and supply, which in turn was triggered largely by trade flows and interest rates. Today, financial f