Most countries have adopted the most-favoured-nation principle in setting tariffs, which have largely replaced quotas. Tariffs (which are preferable to quotas but still a barrier to trade) have again been steadily reduced in successive rounds of negotiations. Browse or download the text of the Multilateral Agreement on Trade in Goods from the Legal Texts Portal The growth of international trade has led to a complex and ever-growing primary law that includes international treaties and agreements, domestic legislation and jurisprudence for the settlement of trade disputes. This research guide focuses on the multilateral trading system managed by the World Trade Organization. It also contains information on regional and bilateral trade agreements, in particular those to which the United States has acceded. Some exceptions to the most-favoured-nation principle have been allowed, and Canada has benefited. The United States received an exemption from most-favoured-nation rules in 1965 to accede to the Agreement on Automotive Products between Canada and the United States (Auto Pact). Canada did not need an exemption because it allowed companies from any country to participate, as long as they followed the rules. Like other developed countries, Canada has been granted exemptions to grant tariff preferences to developing countries for a number of products under the Generalized System of Preferences. Canada was also a party to the Multifibre Arrangement (MFA), which allowed developed countries to impose quantitative restrictions on textile imports from developing countries (the agreement was replaced by the WTO Agreement on Textiles and Clothing in 1995).
While gatt was a set of rules agreed upon by nations, the WTO is an intergovernmental organization with its own headquarters and staff, and its scope includes both trade in goods and trade in services and intellectual property rights. Although designed to serve multilateral agreements, plurilateral agreements have led to selective trade during several rounds of GATT negotiations (in particular the Tokyo Round) and have caused fragmentation among members. WTO agreements are generally a multilateral mechanism for the settlement of GATT agreements. [24] The working assumption for customs negotiations was a linear tariff reduction of 50% with the smallest number of exceptions. A lengthy argument developed about the trade impact that a single linear reduction would have on the dispersed rates (low and high tariffs quite far away) of the United States compared to the much more concentrated rates of the EEC, which also tended to be less in possession of the United States tariffs. The GATT, which was established more than a year before the North Atlantic Treaty Organization (NATO), a Western military alliance, played an important role in the Cold War that began shortly after World War II. It helped the US-led capitalist West expand its influence by liberalizing trade through multilateral agreements. The West, with which Canada was allied, gained other economic allies through these agreements, which strengthened its global influence over the communist Eastern bloc under the leadership of the Soviet Union. After the Cold War, with the collapse of the Soviet Union in 1991, the GATT became a truly global organization – the WTO – and included former communist bloc countries such as the Czech Republic, Poland and Romania. In addition to facilitating applied tariff reductions, gatt`s early contribution to trade liberalization includes “the immobilization of negotiated tariff reductions for a longer period (which became more permanent in 1955), the definition of the universality of non-discrimination through most-favoured-nation (MFN) treatment, and the status of national treatment, ensuring greater transparency of trade policy measures and the creation of a forum for future negotiations. and for the peaceful settlement of bilateral disputes.
All these elements have contributed to the rationalization of trade policy and the elimination of trade barriers and political uncertainty. [4] The GATT and its successor, the WTO, have succeeded in reducing tariffs. Average tariffs for major GATT participants were about 22% in 1947, but 5% after the Uruguay Round in 1999. [4] Experts attribute some of these tariff changes to GATT and the WTO. [5] [6] [7] One of the most important achievements of gatt has been trade without discrimination. Each GATT signatory member should be treated like any other. This is called the most-favoured-nation principle and it has been adopted in the WTO. In practice, it follows that once a country has negotiated a tariff reduction with other countries (usually its main trading partners), the same reduction automatically applies to all GATT signatories. (c) The CONTRACTING PARTIES, in agreement with the International Monetary Fund, shall apply the rules relating to the conversion by the Parties of any foreign currency for which multiple exchange rates are maintained in accordance with the Articles of the Agreement on the International Monetary Fund. Any Party may apply these rules to such foreign currencies instead of using nominal values for the purposes of paragraph 2. Pending the adoption of such provisions by the Contracting Parties, each Contracting Party may apply conversion rules for such a foreign currency for the purposes of paragraph 2 which are intended to effectively reflect the value of that foreign currency in trade.
The Uruguay Round Agreement also established the World Trade Organization (WTO) as an administrative body, replacing or merging gatt and covering all agreements and arrangements concluded under the Uruguay Round. While GATT was formally concluded at the end of the Uruguay Round on 15 April 1994 and the WTO entered into force on 1 January 1995, GATT remained the WTO Framework Agreement on Trade in Goods. Countries that want to become members of the WTO must first conclude the negotiations in order to become members of the GATT. As of July 2016, 164 countries were WTO members and 21 observer governments (as part of the accession process). The Kennedy Round took place from 1962 to 1967. Tariffs of $40 billion have been abolished or reduced. In December 1993, after seven years of negotiations, GATT reached an agreement between 117 countries, including the United States. This round took place in Uruguay and was therefore called the Uruguay Round. The Final Act, which embodies the outcome of the Uruguay Round of multilateral trade negotiations, was the agreement reached in that Round and was signed in April 1994. With this agreement, the World Trade Organization (WTO) was created. The WTO is the body responsible for implementing the agreement, and it has also started the current round in Doha.
To join the WTO now, a nation must apply to become a member. The WTO currently has 164 members. (b) Similar provisions shall apply to any Contracting Party that is not a member of the Fund from the date on which that Contracting Party becomes a member of the Fund or concludes a special exchange agreement in accordance with Article XV. 2. Paragraph 1 of this Article shall not apply to imports of products intended for direct or final consumption in public use and which are not otherwise intended for resale or use in the manufacture of goods for sale*. Canada had negotiated trade agreements with the United States in 1935 and 1938, but once the two countries signed the GATT, it became the basic agreement that governed trade relations between them and replaced the 1938 agreement (see Canada-United States Economic Relations). GATT rules required each member state to grant all members the same privileges in terms of tariffs and other trade policy measures it grants to the most-favoured-nation (MFN) with which it negotiates. This is called the most-favoured-nation principle and it was introduced to eliminate trade discrimination. However, their main achievement at the time was the adoption of Part IV of the GATT, which freed them from reciprocal reciprocity vis-à-vis the industrialized countries in trade negotiations. According to many developing countries, this was a direct result of UNCTAD`s call for a better trade deal for them. 2. In applying import restrictions to products, the Contracting Parties shall endeavour to distribute trade in such products as close as possible to the proportions which can be expected of the various Contracting Parties without such restrictions and, to this end, shall comply with the following provisions: GATT was established to establish rules to put an end to the most costly and undesirable features of the protectionist period of the period pre-war or to limit them; namely quantitative barriers to trade such as trade controls and quotas.
The agreement also provided for a system for the settlement of trade disputes between nations, and the framework allowed for a series of multilateral negotiations on the elimination of tariff barriers. .