General Agreement on Tariffs and Trade (GATT)

The General Agreement on Tariffs and Trade (GATT) originated from the post-World War II Bretton Woods Conference, which established the World Bank and the International Monetary Fund. An envisioned third organization, the International Trade Organization (ITO), failed due to U.S. opposition, making GATT the primary multilateral institution for trade.

GATT was not a formal organization but an umbrella agreement to govern international trade talks. It quickly expanded from 8 to 123 members by 1994, conducting eight rounds of trade talks to liberalize trade, primarily by cutting tariffs.

Tariffs, taxes on imported goods, increase prices and reduce demand, often to protect domestic industries. Economists generally criticize tariffs for undermining comparative advantage and reducing efficiency. GATT's primary purpose was to reduce these tariffs, starting with the 1947 Geneva Round which reduced tariffs on over 45,000 goods.

Starting with the 1964 Kennedy Round, GATT's focus expanded beyond tariffs to address issues like dumping—selling goods below cost to damage recipient economies. The Tokyo Round (1979) further broadened negotiations to include non-tariff barriers, such as quotas, sanitary measures, and technical barriers, aiming to establish common understandings for their regulation.

The Uruguay Round (1994) was the most complex, involving 123 countries. It addressed intellectual property rights, agricultural subsidies, services trade, and established a dispute settlement mechanism. Crucially, it led to the creation of the World Trade Organization (WTO).

GATT significantly reduced average tariff rates from 22% in 1947 to 5% by 1994. Its membership grew to 123 countries, representing over 80% of global trade. GATT increased transparency and rationalized trade barriers, leading to a dramatic increase in international trade value, paving the way for the WTO's establishment in 1995.