Why GATT Changed to WTO?

There are multiple reasons for the replacement of the General Agreement of Tariffs and Trade (GATT) (an international trade agreement signed in 1947) with the World Trade Organisation (WTO). The topic, ‘GATT’ comes under the GS-II of the Civil Services Examination and this article will provide you with the facts on GATT, its purpose, background and its replacement with WTO.

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Why the General Agreement of Tariffs and Trade was replaced with the World Trade Organisation?

Some of the reasons are listed below.

  1. GATT lacked a coherent institutional structure. World Trade Organisation (WTO) incorporates the principles of GATT and provides a more institutional framework for implementing and extending them.
  2. GATT was ad hoc and provisional in nature, it was never ratified in the parliaments of member countries.
  3. WTO and its agreements are permanent, it has a strong legal basis, and member countries have ratified it in their parliaments.
  4. GATT dealt with just trade in goods, WTO covers services and intellectual property as well.
  5. WTO dispute settlement is faster, its rulings can never be blocked.

Candidates would find this topic to be of importance while preparing for IAS Exam.

What is the GATT and its purpose?

General Agreement on Tariffs and Trade (GATT)  was an international trade agreement signed in 1947. 23 nations were signatories of this trade agreement. GATT came into effect on January 1, 1948. The purpose of GATT was to liberalise trade by reducing tariffs and reducing quotas among member countries. The member nations had to remove all the trade discriminations. The 7 rounds of negotiations from 1947 to 1993 reduced average tariffs on industrial goods from 40% to 5%. The steps taken at GATT led to economic globalization.

Is GATT still in Effect?

No GATT was replaced by WTO in 1995. Uruguay round of GATT negotiations started in September 1986, and it concluded on 15 April 1994 after nearly 8 years of negotiations. This culminated in the formation of the World Trade Organisation (WTO).

How Many Countries were in GATT?

By the end of the Uruguay Round of negotiations in 1994, 128 countries were part of GATT.

FAQ about Gatt

Why is WTO better than GATT?

(1) The WTO covers services and intellectual property. (2)The WTO dispute settlement system is faster, more automatic than the old GATT system. (3)Its rulings cannot be blocked.

What is the MFN principle?

A most-favored-nation (MFN) clause requires a country to provide any privileges, concessions and immunities granted to one nation in a trade agreement to all other WTO member countries. Although its name implies favoritism toward another nation, it denotes the equal treatment of all countries.

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