Summary
Highlights
Following the protectionist policies contributing to WWII, international institutions like the UN, IMF, and World Bank were established to foster peace and economic stability. Simultaneously, a group of 23 countries signed the General Agreement on Trade and Tariffs (GATT) in 1947 to lower trade barriers, after the International Trade Organization (ITO) plan was rejected by the US Congress. GATT focused initially on reducing tariffs and later expanded to issues like anti-dumping.
GATT evolved into the World Trade Organization (WTO) during the Uruguay Round negotiations, which lasted from 1986 to 1994. This evolution was necessary to address new economic aspects like services and intellectual property that GATT did not cover. By the time the WTO was established, 125 countries, representing about 90% of global trade, were part of the agreement. The WTO is essentially GATT with added rules and responsibilities, continuing the commitment to lower tariffs and eliminate unfair trade practices.
A significant difference between GATT and WTO lies in their agreement systems: GATT had multilateral and plurilateral agreements, allowing voluntary participation in some, while all WTO agreements are multilateral and binding. The dispute resolution system also strengthened considerably. Under GATT, all parties, including the losing one, had to agree to a resolution, often weakening its effectiveness. The WTO, however, established an independent body to investigate disputes and issues binding rulings, with provisions for unilateral action against non-compliant members, making the process faster and more decisive.
Both GATT and WTO allow countries to self-identify their economic status (developed or developing). This policy has become controversial, especially with countries like China, the world's second-largest economy, claiming 'developing country' status. This status grants exemptions from certain rules, allowing them to protect some industries or engage in practices that might be considered unfair trade. The lack of clear criteria for defining 'developing' status within the WTO remains a significant debate.
Both GATT and the WTO aim to ensure fair global trade. While the WTO is not without its flaws and faces ongoing challenges, it stands as the sole global supranational organization dedicated to facilitating trade. Its continued interaction with major world economies will shape the future of international commerce.