GATT 1947: Its Basic Objectives, and How Far It Succeeded

In one line

GATT was a treaty that spent forty seven years pretending to be an organisation, and its basic objective was to reduce tariffs and eliminate discrimination so that trade could grow.

In exam wording: the General Agreement on Tariffs and Trade, signed at Geneva on 30 October 1947 and applied provisionally from 1 January 1948, had as its objectives the substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce, pursued through the obligations of most favoured nation treatment, national treatment, tariff binding and the general prohibition of quantitative restrictions.

The objectives, from the preamble

The preamble states them, and a candidate asked for the basic objectives of GATT should begin there. The contracting parties recognise that their relations in the field of trade and economic endeavour should be conducted with a view to:

raising standards of living;

ensuring full employment and a large and steadily growing volume of real income and effective demand;

developing the full use of the resources of the world;

and expanding the production and exchange of goods.

And the means: entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce.

Note what is not there. Free trade is not an objective. The objectives are economic outcomes, and reduced tariffs and non discrimination are the means.

The four pillars

1. Most favoured nation, Article I. With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation, any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

2. National treatment, Article III. Internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, should not be applied to imported or domestic products so as to afford protection to domestic production; and imported products shall be accorded treatment no less favourable than that accorded to like domestic products.

Together those two are the principle of non discrimination. Most favoured nation forbids discrimination between foreigners; national treatment forbids discrimination between foreigners and locals.

3. Tariff bindings, Article II. Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in its Schedule of Concessions. A bound tariff may not be exceeded, and the Schedules are what the rounds of negotiation produce.