GATT’s Successes and Failures
The General Agreement on Tariffs and Trade (GATT) was formed in 1949 and was the main international organization regulating trade between nations. One of its objectives was to help reduce the effects of the Great Depression by liberalizing world trade.
However, GATT experienced major failures during its enforcement which led to the formation of the World Trade Organization (WTO) in 1995. The WTO superseded GATT and its rules were more comprehensive, thus making it better equipped to deal with the challenges facing international trade.
In this essay, I will firstly discuss the extent of GATT’s success. I will then go on to argue that the need for a new organization became evident as GATT started failing to achieve its objectives. Lastly, I will conclude by saying that although GATT had many failures, it did create some successes which laid the foundation for the WTO.
2. The Extent of GATT’s Success
GATT was unable to achieve its objective of liberalizing world trade and reducing the effects of the Great Depression. This was due to a number of reasons which I will now discuss in detail.
2. 1 Major Failures During Enforcement
One of the major problems facing GATT was that the implementation of its rules was a challenge. This was because the dominant member countries often ignored decisions made by other GATT members. For example, in 1971, the United States unilaterally imposed a 10% import surcharge on all imports in order to protect its domestic producers (Bhagwati, 1992). This goes against one of GATT’s key principles which is most-favoured-nation treatment where all member countries must be treated equally.
Another failure of GATT was that it failed to liberalize the agricultural trade. This was due to the fact that agriculture is a politically sensitive issue for many countries and they were reluctant to lower their tariffs on agricultural products. As a result, agricultural tariffs remained high and this led to inefficiencies in the world market for agricultural goods (Bhagwati, 1992).
GATT’s legal system also experienced several failures during the 1980s. This was due to a number of reasons such as: lack of transparency, unequal treatment of different countries, excessive delay in dispute settlement and inconsistent rulings (Bhagwati, 1992). These failures led to a decline in confidence in GATT’s legal system and this made it difficult for GATT to enforce its rules.
2. 2 The successes of GATT
Despite these failures, GATT did generate some successes. One of these was that it helped reduce tariffs on manufactured goods by 70% between 1947 and 1967 (Bhagwati, 1992). This made it easier for companies to trade internationally and helped promote economic growth.
Another success of GATT was that it helped create an international trading system which was relatively stable and predictable. This provided certainty for businesses and encouraged them to enter into long-term contracts knowing that there would be no sudden changes in tariffs or other barriers to trade (Bhagwati, 1992).
3. The Need for a New Organization
The need for another organization to ensure effectiveness and efficiency in dealing with common problems was realized as early as the 1970s when GATT started to experience some failures. However, it was not until the early 1990s that the WTO was created.
3. 1 The WTO Brought a New Institutional Structure
One of the key features of the WTO is that it brought a new institutional structure in areas like dispute settlement and conformity to its provisions. This made the WTO more effective and efficient in dealing with trade disputes and helped to ensure that its rules were adhered to by member countries.
The WTO also has a stronger legal foundation than GATT did. This is because the WTO’s rules are enshrined in international law and are binding on all member countries. This means that member countries cannot ignore or break the rules without facing consequences.
In conclusion, it is clear that GATT experienced major failures during its enforcement but this does not mean that it did not generate any successes. One of its main successes was that it helped reduce tariffs on manufactured goods which made international trade easier and promoted economic growth.
The need for a new organization became evident as GATT started failing to achieve its objectives. The WTO was created in order to overcome the challenges facing GATT and it has been more successful in doing so due to its stronger legal foundation and more effective institutional structure.