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Q1.Write a short note on GATT and WTO, highlighting the difference between the two. Ans. General Agreement on Tariff and Trade( GATT): The GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation — notably the “Britton Woods” institutions now known as the World Bank and the International Monetary Fund. The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) — a new specialized agency of the United Nations. The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services. In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s-tariff negotiations were opened among the 23 founding GATT “contracting parties” in 1946. This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion or about one-fifth — of world trade. It was also agreed that the value of these concessions should be protected by early and largely “provisional” acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948. Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in national legislatures proved impossible in some cases. When the United States’ government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO. Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of “plural-lateral” voluntary membership agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of “trade rounds”. The biggest leaps forward in international trade liberalization have come through multilateral trade negotiations, or “trade rounds”, under the auspices of GATT — the Uruguay Round was the latest and most extensive. The limited achievement of the Tokyo Round, outside the tariff reduction results, was a sign of difficult times to come. GATT’s success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined the credibility and effectiveness of GATT. WTO World Trade Organization came into existence in 1995 after the desolation of General Agreement on Tariff and Trade (GATT). The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by:  Administering trade agreements  Acting as a forum for trade negotiations  Settling trade disputes  Reviewing national trade policies  Assisting developing countries in trade policy issues, through technical assistance and training programs  Cooperating with other international organizations The WTO has nearly 150 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments. The WTO’s top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements. The WTO Secretariat, based in Geneva, has around 600 staff and is headed by a director-general. Its annual budget is roughly 160 million Swiss francs. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given with. The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus. Difference between WTO and GATT:- The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following: a. The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat. b. The GATT was applied on a “provisional basis” even if, after more than forty years, governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent. c. The GATT rules applied to trade in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property. d. While GATT was a multilateral instrument, by the 1980s many new agreements had been added of a plural-lateral, and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership. e. The WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.

June 14, 2013 By: Meliza Category: 1st SEM

General Agreement on Tariff and Trade( GATT):

The GATT, was established on a provisional basis after the Second World War in the wake of other new multilateral institutions dedicated to international economic cooperation — notably the “Britton Woods” institutions now known as the World Bank and the International Monetary Fund.

The original 23 GATT countries were among over 50 which agreed a draft Charter for an International Trade Organization (ITO) — a new specialized agency of the United Nations. The Charter was intended to provide not only world trade disciplines but also contained rules relating to employment, commodity agreements, restrictive business practices, international investment and services.

In an effort to give an early boost to trade liberalization after the Second World War and to begin to correct the large overhang of protectionist measures which remained in place from the early 1930s-tariff negotiations were opened among the 23 founding GATT “contracting parties” in 1946. This first round of negotiations resulted in 45,000 tariff concessions affecting $10 billion or about one-fifth — of world trade. It was also agreed that the value of these concessions should be protected by early and largely “provisional” acceptance of some of the trade rules in the draft ITO Charter. The tariff concessions and rules together became known as the General Agreement on Tariffs and Trade and entered into force in January 1948.

Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Havana in March 1948, ratification in national legislatures proved impossible in some cases. When the United States’ government announced, in 1950, that it would not seek Congressional ratification of the Havana Charter, the ITO was effectively dead. Despite its provisional nature, the GATT remained the only multilateral instrument governing international trade from 1948 until the establishment of the WTO.

Although, in its 47 years, the basic legal text of the GATT remained much as it was in 1948, there were additions in the form of “plural-lateral” voluntary membership agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of “trade rounds”.

The biggest leaps forward in international trade liberalization have come through multilateral trade negotiations, or “trade rounds”, under the auspices of GATT — the Uruguay Round was the latest and most extensive.

The limited achievement of the Tokyo Round, outside the tariff reduction results, was a sign of difficult times to come. GATT’s success in reducing tariffs to such a low level, combined with a series of economic recessions in the 1970s and early 1980s, drove governments to devise other forms of protection for sectors facing increased overseas competition. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. Both these changes undermined the credibility and effectiveness of GATT.

WTO

World Trade Organization came into existence in 1995 after the desolation of General Agreement on Tariff and Trade (GATT).

The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by:

  • Administering trade agreements
  • Acting as a forum for trade negotiations
  • Settling trade disputes
  • Reviewing national trade policies
  • Assisting developing countries in trade policy issues, through technical assistance and training programs
  • Cooperating with other international organizations

The WTO has nearly 150 members, accounting for over 97% of world trade. Around 30 others are negotiating membership. Decisions are made by the entire membership. This is typically by consensus. A majority vote is also possible but it has never been used in the WTO, and was extremely rare under the WTO’s predecessor, GATT. The WTO’s agreements have been ratified in all members’ parliaments.

The WTO’s top level decision-making body is the Ministerial Conference which meets at least once every two years. Below this is the General Council  which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council.

Numerous specialized committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

The WTO Secretariat, based in Geneva, has around 600 staff and is headed by a director-general. Its annual budget is roughly 160 million Swiss francs. It does not have branch offices outside Geneva. Since decisions are taken by the members themselves, the Secretariat does not have the decision-making role that other international bureaucracies are given with.

The WTO is run by its member governments. All major decisions are made by the membership as a whole, either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). Decisions are normally taken by consensus.

Difference between WTO and GATT:-

The World Trade Organization is not a simple extension of GATT; on the contrary, it completely replaces its predecessor and has a very different character. Among the principal differences are the following:

  1. The GATT was a set of rules, a multilateral agreement, with no institutional foundation, only a small associated secretariat which had its origins in the attempt to establish an International Trade Organization in the 1940s. The WTO is a permanent institution with its own secretariat.
  2. The GATT was applied on a “provisional basis” even if, after more than forty years, governments chose to treat it as a permanent commitment. The WTO commitments are full and permanent.
  3. The GATT rules applied to trade in merchandise goods. In addition to goods, the WTO covers trade in services and trade-related aspects of intellectual property.
  4. While GATT was a multilateral instrument, by the 1980s many new agreements had been added of a plural-lateral, and therefore selective, nature. The agreements which constitute the WTO are almost all multilateral and, thus, involve commitments for the entire membership.

The WTO dispute settlement system is faster, more automatic, and thus much less susceptible to blockages, than the old GATT system. The implementation of WTO dispute findings will also be more easily assured.

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