Stock Market Guide to the General Agreement on Tariff and Trade
GATT, or more properly “the GATT”, stands for the General Agreement on Tariffs and Trade. This historic agreement was formulated at the 1944 Bretton Woods Conference that, even while World War II still raged, sought to facilitate and boost the world’s economic recovery once the war ended. The economists and diplomats from the 23 countries who formulated GATT set as their prime mission the reduction of trade barriers, subsidies and protectionist policies.
GATT was originally intended to become a wide-ranging nongovernmental organization similar to the World Bank, but perhaps due to the ingrained protectionist tendencies of the participating nations and deep resistance to a more open trade policy from entrenched interests, this did not occur. Rather, GATT eventually evolved into the World Trade Organization (WTO) following the conclusion of the “Uruguay Round” of GATT meetings in the mid-1990s.
This is not to say that GATT was a failure; far from it! Over its nearly five decades of existence and eight “rounds”, or scheduled series of meetings, GATT oversaw the gradual relaxation of trade tariffs and a general loosening of the world’s economy. To some, this was tantamount to creeping globalization and the destruction of national and native industries. While it is true that any liberalization of trade can damage protected industries and economies, the bigger picture is much more positive and a freer world trade system has been proven to benefit the vast majority of those affected.
Since 1947, when its provisions first began to be implemented, GATT expanded to 125 member nations and, in the early 1960s, greatly influenced the formation of the European Economic Community. At each round of meetings, thousands of tariff concessions and billions of dollars worth of trade tariffs were eliminated. The Uruguay Round lasting from 1985 to 1994 was in many ways the most difficult, as thorny areas such as agricultural policy, intellectual property and global services were tackled.
Though inconclusive, the Uruguay Round saw the creation of the World Trade Organization which not only superseded GATT, has a set institutional structure. In this respect, the function originally intended for GATT in 1944 has finally been realized.