What is General Agreement on Tariffs and Trade (GATT)?
General Agreement on Tariffs and Trade (GATT) was the first international free trade agreement. It was established in 1948 as a 23-country pact and lasted until 1995 when it was expanded to 128 countries. In its place, the World Trade Organization was established.
Understanding General Agreement on Tariffs and Trade (GATT)
The GATT's goal was to prevent destructive import tariffs which related to the Great Depression's 66 percent decline in world trade. The GATT aided in the recovery of global economic stability following the ravages of the Great Depression and World War II.
There were three primary stipulations in the GATT. The most crucial criterion here is that every member conveys the most-favored-nation title to each other. When it emerged to tariffs, all participants had to be addressed similarly. Special duties and trading blocs between members of the British Commonwealth were not included in the treaty. It allowed tariffs if eliminating them would cause severe harm to domestic businesses.
Second, the GATT made it illegal to limit the amount of foreign trade. The third provision, which addresses emerging countries joining the GATT, was inserted in 1965. To help developing nations, industrialized nations agreed to remove tariffs on their import. Lower tariffs benefited both rich and developing countries. As the GATT boosted the proportion of middle-class customers around the world, enthusiasm for trade with industrialized nations expanded as well.
Practical Example
If the United States of America traded with a few other GATT participants, any duty would be eliminated which was set prior to the establishment of the trade agreement .
In Sentences
- The General Agreement on Tariffs and Trade (GATT) was established to facilitate international trade.
- From April 1947 through December 1993, the General Agreement on Tariffs and Trade (GATT) conducted eight conferences, each having important accomplishments and results.