The General Agreement on Tariffs and Trade Definition

The General Agreement on Tariffs and Trade (GATT) is an international trade agreement that was established in 1947 to promote free trade and reduce trade barriers between member countries. The GATT has since been replaced by the World Trade Organization (WTO), but its principles continue to guide global trade today.

The primary goal of the GATT was to reduce tariffs on imported goods, which were seen as a major barrier to trade. Tariffs are taxes that countries impose on foreign goods in order to protect domestic industries and generate revenue. However, high tariffs can make it difficult for foreign goods to compete with domestic goods, and can limit consumer choice.

Under the GATT, member countries agreed to gradually reduce their tariffs on imported goods, with the ultimate goal of achieving free trade. This was achieved through a series of negotiations called rounds, which took place over several decades. The most famous of these rounds was the Uruguay Round, which took place from 1986 to 1994 and resulted in the creation of the WTO.

In addition to reducing tariffs, the GATT also sought to eliminate other trade barriers, such as quotas on imported goods and discriminatory treatment of foreign firms. It also established rules for resolving trade disputes between member countries.

One of the key principles of the GATT was the Most Favored Nation (MFN) principle, which required member countries to treat all other member countries equally in terms of trade. This meant that any trade concessions made to one country had to be extended to all other countries. This helped to prevent countries from using trade as a political weapon or engaging in discriminatory practices.

Another important principle of the GATT was the principle of national treatment, which required member countries to treat foreign goods and services the same as domestic goods and services. This meant that foreign firms could not be discriminated against in terms of taxes, regulations, or other policies.

The GATT was a major achievement in the history of international trade, and its principles continue to guide global trade today. While some countries have resisted the move towards free trade, most recognize the benefits of reducing trade barriers and promoting greater economic integration. As the world becomes increasingly interconnected, the need for international trade agreements like the GATT/WTO has only become more pressing.