The WTO’s predecessor, 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 “Bretton woods” institutions, now known as the World Bank and the International Monetary Fund.
The original 23 GATT countries were among 50 countries 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. India was one of the founder members of GATT (1947).
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In an effort to give an early boost to trade liberalisation after the Second World War and to begin to correct the large overhand of projectionist 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 the 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 (GATT) and entered into force in January 1948.
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Although the ITO Charter was finally agreed at a UN Conference on Trade and Employment in Hanvana 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 in 1995.
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 “plurilateral” voluntary membership, agreements and continual efforts to reduce tariffs. Much of this was achieved through a series of “trade rounds.”
Trade Rounds the Package Route to Progress:
The biggest leaps forward in international trade liberalisation have come through multilateral trade negotiations, or “trade rounds” under the auspices of GATT, the Uruguay Round was the latest and most extensive.
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Although often lengthy, trade rounds offer a package approach to trade negotiations – an approach with a number of advantages over issue-by- issue negotiations. For a start, a trade round allows participants to seek and secure advantages across a wide range of issues.
Second, concessions which are necessary but would otherwise be difficult to defend in domestic political terms can be made more easily in the context of package which also contains politically and economically attractive benefits.
Third, developing countries and other less powerful participants have a greater chance of influencing the multilateral system in the context of a round than if bilateral relationships between major trading nations are allowed to dominate.
Finally, overall reform in politically-sensitive sectors of world trade can be more feasible in the context of global package reform of agricultural trade was a good example in the Uruguay Round.
Most of GATT’s early trade rounds were devoted to continuing the process of reducing tariffs. The results of the Kennedy Round in the mid-sixties, however, included a new GATT Antidumping Agreement. The Tokyo Round during the seventies was a more sweeping attempt to extend and improve the system.
The Tokyo round A first try at reforming the trading system:
Conducted between 1973 and 1979 and with 102 participating countries, the Tokyo Round continued GATT’s efforts to progressively reduce tariffs.
The results included an average 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% at the time of GATT’s creation.
The tariff reductions phased in over a period of eight years, involved an element of harmonisation, bringing the highest tariffs down proportionately more than the lowest.