LLM Group 2 Business Law Global Trade Under World Trade Organisation 2025-26 Question Paper with Solutions

The Preamble states the purpose in four limbs and they should be quoted in that order. The contracting parties recognised 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. The means were to be 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.

Two things follow from that language and examiners look for both. First, trade liberalisation in GATT is instrumental and not an end in itself: the ends are living standards, employment and real income, and liberalisation is the chosen means. Second, the purpose has two distinct objects, the reduction of barriers and the elimination of discrimination, and they are pursued by different machinery. Reduction is done by negotiation, which produces Schedules. Elimination of discrimination is done by rule, which produces Articles I and III.

Article III, national treatment, and Article XI, elimination of quantitative restrictions. Article III forbids internal taxes and regulations that protect domestic production, and so stops a member from taking back at the border's inside edge what it conceded at the border. Article XI prohibits quotas, import and export licences and other non tariff restrictions. Together the three articles express a single legislative preference: protection may be given, but only by a bound and visible tariff, never by a quota and never by internal discrimination.

How far the purpose was achieved: the case for GATT

On tariffs the record is very strong and should be given with figures. Eight rounds were held between 1947 and 1994: Geneva 1947, Annecy 1949, Torquay 1951, Geneva 1956, the Dillon Round 1960 to 1961, the Kennedy Round 1964 to 1967, the Tokyo Round 1973 to 1979 and the Uruguay Round 1986 to 1994. Average industrial tariffs in the developed countries fell from roughly forty per cent in 1947 to under four per cent after the Uruguay Round commitments were phased in. World merchandise trade grew faster than world output in almost every year of that period. No other explanation for a change of that magnitude is available.

How far the purpose was achieved: the case against

The birth defect: the Protocol of Provisional Application and the grandfather clause. Because GATT applied provisionally, Part II, which contains Articles III to XXIII, applied only "to the fullest extent not inconsistent with existing legislation". Existing inconsistent domestic law was therefore protected indefinitely. The United States Agricultural Adjustment Act waiver of 1955 is the clearest instance: the United States obtained a waiver of Article XI for agricultural quotas which was never withdrawn, and agriculture stood substantially outside the disciplines for forty years.

Agriculture and textiles, the two sectors that mattered most to developing countries, were the two that escaped. Agricultural export subsidies and domestic support were effectively unregulated until the Agreement on Agriculture of 1995. Textiles and clothing were governed from 1974 by the Multi Fibre Arrangement, a licensed derogation from Article XI which allowed importing countries to impose bilateral quotas on precisely the products in which developing countries were competitive. GATT's non discrimination rule was suspended for the sectors where developing countries could have used it.

The two Tuna Dolphin reports, worked, because they show the defect and the ambition together

United States: Restrictions on Imports of Tuna (Mexico v United States), GATT Panel Report DS21/R, 3 September 1991. The United States Marine Mammal Protection Act embargoed imports of yellowfin tuna caught in the eastern tropical Pacific with purse seine nets, because that method killed dolphins, unless the exporting country's incidental dolphin kill rate was within a set proportion of the American rate. Mexico complained.

The panel held the embargo an Article XI quantitative restriction, not saved by Article III because it addressed a process and not a product characteristic, and not saved by Article XX(b) or (g) because those exceptions could not be applied to protect life or resources outside the jurisdiction of the importing state, and because the measure was not necessary when other means had not been tried. Mexico won, and the report was never adopted, Mexico not pressing for adoption while it negotiated the North American Free Trade Agreement.

The verdict

Measured against its stated purpose, GATT succeeded almost completely on tariffs, substantially on predictability and non discrimination in industrial goods, and hardly at all on the sectors and instruments that its own exceptions carved out. The honest formulation is that GATT achieved the means it chose, tariff reduction by negotiation, and that its failures were failures of coverage rather than of design: agriculture, textiles, services and intellectual property were outside it, and the grey area measures were beside it. That is precisely the diagnosis that produced the Uruguay Round, and it is why the World Trade Organization Agreement of 15 April 1994 is drafted as a single undertaking with a compulsory and unblockable dispute settlement procedure.

Conclusion. The basic purpose of GATT was to raise living standards, employment and real income by reducing tariffs and eliminating discrimination in trade, and its instruments were the bound Schedule under Article II, most favoured nation treatment under Article I, national treatment under Article III and the prohibition of quotas under Article XI. On the first instrument it succeeded to a degree without parallel in economic history, reducing industrial tariffs from about forty per cent to under four.