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Despite the designation ‘agreement’ in its title, GATT is an international organization created in 1947 to provide a continuing basis for nations to negotiate and regulate commercial policies. The principal activity is multinational negotiation for tariff reductions. Its articles of agreement provide principles of behaviour and a general set of rules governing the conduct of trade among nations. GATT was signed by 22 countries in 1947, in a bid to encourage free trade and avoid the protectionism prevalent in the 1930s. Now more than 100 countries have signed.
GATT is based on two principles: reciprocity in liberalizing trade; and nondiscrimination. GATT helped to provide substantial progress in reducing quotas in the 1950s and 1960s. GATT has also helped to reduce tariffs in a series of negotiating ‘rounds’. By the seventh round (the Tokyo round), completed in 1979, tariffs applied to industrial products were down to 6.6% for the EEC, 6.4% for the US and 5.5% for Japan, and were set to be reduced to 4.7, 4.4 and 2.8% respectively by 1 January 1987.
GATT has two weaknesses that have thwarted its efforts in other areas: it has precious few weapons; and it depends on countries being aware of mutual self-interest. In particular, GATT has had to resort to toothless ‘codes’ for trade issues like government procurement, subsidies and anti-dumping action. Agriculture and services have been virtually untouched. Tariffs are relatively easy to police, but hidden, non-tariff barriers are more difficult. TF |
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