General Agreement on Tariffs and Trade

The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty created to promote international trade by reducing trade barriers, chiefly tariffs and import quotas. It emerged in the aftermath of the Second World War when governments sought new institutional frameworks to regulate and expand global commerce. Although initially conceived as a provisional arrangement pending the creation of the International Trade Organization (ITO), it became the principal instrument governing world trade from 1948 until the establishment of the World Trade Organization (WTO) in 1995. Over this period, GATT shaped the foundations of modern trade liberalisation through successive negotiation rounds and the formulation of key trade principles.

Origins and formation

The origins of GATT can be traced to the United Nations Conference on Trade and Employment, held in the late 1940s, which aimed to establish the ITO as part of a broader post-war economic order alongside the International Monetary Fund and the World Bank. Although more than 50 nations negotiated the draft Havana Charter for the ITO, the project collapsed following the United States’ refusal to ratify the charter. In the absence of a fully fledged trade organisation, the GATT—initially intended as a temporary framework—became the operative mechanism for multilateral trade governance.
On 30 October 1947, 23 countries signed the GATT in Geneva. It took effect provisionally on 1 January 1948, setting the stage for tariff reductions and the standardisation of trade practices. From the outset, government procurement was excluded from the agreement’s scope. The signatories committed to reducing tariffs and eliminating discriminatory preferences based on the reciprocal and mutually advantageous principles contained in the preamble. Despite being provisional, GATT rapidly assumed the role of a de facto international organisation due to the absence of the ITO.

Intellectual foundations and objectives

The GATT’s conceptual development drew heavily on the work of legal scholars and economists, particularly Ernst-Ulrich Petersmann, Jan Tumlir and John Jackson. Their ideas shaped the GATT’s focus on non-discrimination, most-favoured-nation treatment and transparency as essential components of international trade law. The architects also regarded trade liberalisation as instrumental to post-war reconstruction, global economic integration and collective prosperity.
Beyond tariff removal, the agreement aimed to promote fair competition, reduce trade distortions and ensure predictable trading conditions. These principles later underpinned the WTO framework and continue to influence contemporary trade negotiations.

Successive negotiation rounds

Between 1947 and 1995, GATT evolved through nine major negotiation rounds. Each round expanded the agreement’s scope, deepened commitments and progressively reduced global tariff levels.

• Initial Round (1947): The preparatory sessions at the UN Conference on Trade and Employment led to the initial signing of the GATT. The focus was on establishing basic rules and reducing tariffs.
• Annecy Round (1949): Thirteen countries participated, resulting in around 5,000 tariff reductions.
• Torquay Round (1951): Thirty-eight countries made 8,700 tariff concessions, substantially reducing tariff levels from their 1948 baseline and consolidating the GATT as the principal forum for trade negotiations after the United States rejected the Havana Charter.
• Geneva Round (1955–1956): Twenty-six countries achieved tariff reductions amounting to approximately 2.5 billion US dollars, continuing the gradual liberalisation of global trade.
• Dillon Round (1960–1962): Named after US Treasury Secretary Douglas Dillon, this round involved 26 countries and reduced tariffs by more than 4.9 billion US dollars. It also addressed trade matters arising from the formation of the European Economic Community.
• Kennedy Round (1964–1967): This round was notable for its attempt to implement a linear tariff reduction of 50 per cent. Although the final outcome fell short of this objective, average tariff reductions of about 35 per cent were achieved. Negotiations also addressed anti-dumping rules and reached a provisional agreement to abolish the American Selling Price system for chemicals. The round highlighted tensions arising from European integration, particularly the Common Agricultural Policy, and the growing importance of Japan’s economic expansion. Part IV of the GATT, adopted during this period, recognised the special needs of developing countries and exempted them from reciprocal obligations in negotiations.

The early rounds laid important structural foundations for later major negotiations, particularly the Tokyo Round and the Uruguay Round, which expanded the negotiation scope to non-tariff barriers and services, setting the stage for the establishment of the WTO.

Transition to the World Trade Organization

By the early 1990s, limitations in GATT’s provisional institutional structure prompted governments to pursue a more comprehensive and binding framework. The Uruguay Round (1986–1994) addressed this need by broadening the agreement’s coverage to include services, intellectual property and agriculture while reinforcing dispute settlement procedures.
On 15 April 1994, 123 nations signed the Marrakesh Agreement establishing the WTO. GATT 1947 was retained as GATT 1994 within the WTO’s legal architecture, ensuring continuity while introducing updates and clarifications. The WTO came into force on 1 January 1995, formally succeeding the GATT and expanding the scope of multilateral trade governance.
Countries that had not participated in the GATT by 1995 were required to meet specific accession requirements before joining the WTO. As of 2019, 36 nations remained in the accession process.

Impact on global trade

GATT and its successor the WTO have been widely credited with driving substantial reductions in global tariffs and promoting the expansion of international trade. Average tariffs among major participants declined from approximately 22 per cent in 1947 to around 5 per cent by 1999 following the conclusion of the Uruguay Round. These reductions facilitated global economic integration, increased market access and contributed to sustained economic growth in many regions.
GATT’s influence extended beyond tariff reduction. It contributed to the codification of trade law, strengthened multilateral cooperation and enabled a more predictable business environment. The agreement also played a critical role in shaping post-war economic reconstruction and in fostering long-term international economic stability.

Continuing relevance

Although formally replaced by the WTO, the GATT continues to exert influence through its incorporation into the WTO framework. Many principles first articulated under the GATT remain central to present-day trade negotiations, including commitments to non-discrimination, tariff reduction and transparent trade policies. The agreement’s historical evolution illustrates the progressive institutionalisation of global trade relations and the enduring importance of multilateral approaches to economic governance.