4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

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Tariffs and Trade (GATT)
Functions of GATT
In fulfillment of its objectives, GATT adopted certain measures. These may be
discussed under the following headings.

1. Most favored nation clause

2. Trade negotiations
3. Tariff and non-tariff measures RECENT POSTS
4. Safeguards Weaknesses of Trade Union
5. Complaints and waivers Movement in India and Suggestion to
Strengthen
6. Settlement of disputes
Audit Planning & Developing an Active
1. Most Favored Nation clause Audit Plan – Considerations,
Advantages

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4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

Good and evil effects of Inflation on

The “Most favored Nation clause is one of the significant provisions adopted
Economy
by GATT. Under the concept of Most Favored Nation, all contracting parties of
the agreement would be treated as most favored nations. The principal
Vouching of Cash Receipts | General
objective is that the benefits extended to one should also be extended to all
Guidelines to Auditors
contracting parties. There should be no discrimination among nations. Trading
should be carried on the principle of non-discrimination and reciprocity. This
Audit of Clubs, Hotels & Cinemas in
clause discouraged the member countries from granting any new trade
India | Guidelines to Auditors
concessions unless those were mutually agreed upon. However, many escape
clauses were found. Under specific circumstances, less developed countries
Depreciation – Meaning,
were allowed to exercise the right to discriminate. For example, dumping and
Characteristics, Causes, Objectives,
export subsidy might be countered by trade measures only against the Factors Affecting Depreciation
Calculation
offending country. Moreover, special concessions were allowed for trade with
former colonies of less developed western countries.
Inequality of Income – Causes, Evils
or Consequences
2. Trade negotiations under GATT

From 1947 to 2001, GATT has organized 12 trade negotiations. The following
table shows various negotiations of GATT and WTO since 1947.

Year Round Outcome of Negotiations

Geneva Several thousands of tariff concessions covering nearly

1947
Round 50 per cent of world trade.

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4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

Year Round Outcome of Negotiations

Annecy
1949 Round Announcement of modest tariff reductions.
(France)
Torquay,
1950- Over 1948 level, 25 per cent ' tariff reductions were
England
51 made.
Round
1955- Geneva
Modest tariff reductions
56 Round
Geneva,
1961-
Dillon Modest tariff reductions
62
Round
Geneva, 35 percent tariff reduction on industrial products and
1964-
Kennedy modest reduction in agricultural products. Also
67
Round antidumping code was announced.
Geneva,
1973- Negotiation of additional tariff cuts developed a series of
Tokyo
79 agreements governing the use of non-tariff measures.
Round
1986- Uruguay Tariff non tariff measures, rules, services, intellectual
94 Round property, dispute settlement, creation of WTO etc.

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4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

Year Round Outcome of Negotiations

1996 Two separate working parties were setup on investment

(9 to Singapore and commercial law. Working group was also formed on
13 Ministerial Government procurement, Trade facilitation added to
Dec) WTO agenda.
1998
(18 to Geneva
Programme on E-commerce launched.
20 Ministerial
May)
1999
(30 Seattle
Market access, agriculture, services, E-Commerce
Nov to Ministerial
3 Dec)
2001
(9 to Doha
New Round
13 Ministerial
Dec)

3. Tariff and Non-tariff measures

Tariff measures:

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4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

Tariffs were the important obstacle to international trade. Therefore, GATT

encouraged negotiations for the reduction of hig4 tariffs, The participating
countries agreed to cut tariff of thousands of industrial products. Reduction of
tariff was on reciprocal and mutually advantageous basis. Article 11 of the
GATT provided that all concessions granted by contracting parties must be
entered in a schedule of concessions. Once a concession was included in the
schedule of concessions, it could not be withdrawn except under specified
circumstances.

Non-tariff measures

Post-World War II witnessed reduced distorting effects of non-trade barriers

world trade. The Tokyo Round held during 1973 — 1979 tackled the problems
of non-tariff barriers under more effective international discipline. All the
agreements provide for special and more favorable treatment for developing
countries. The negotiations led to the following non-tariff measures:

restriction on use of subsidies,

technical barriers,
import licensing procedures,
government procurement,
custom valuation,
permission of anti-dumping code.

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To read more about the non-tariff measures of GATT, refer this article: Non-
tariff measures of GATT

5. Complaints and waivers

Article XXII of the GATT entertains complaints from contacting party relating
to the operation of the agreement. The contracting party who is likely to be
deprived of the benefits under GATT agreement can request the other party for
consultation. The basic principle of GATT is that member countries should
consult one another on trade matters and problems. Article XXV of the GATT
provides the procedure for granting waiver to some contracting party from the
application of the provisions of the GATT. Waivers are granted on the approval
by two thirds of voting contracting parties.

6. Settlement of disputes

GATT aimed at the smooth settlement of disputes among the contracting

parties. GATT allows the member countries to settle problems among them by
consulting one another on matters of trade. Initially, the contracting parties
should resolve the disputes by holding talks on bilateral basis. In case of
failure, the dispute may be referred to panels of independent experts formed
under GATT council. The panel members are drawn from countries which
have no direct interest in the disputes. If the offending parties does not act
upon the panel’s decision, the aggrieved party is authorized to withdraw all

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4/4/2020 Functions of General Agreement on Tariffs and Trade (GATT)

concessions offered to the offending party. Since the panel procedure ensures
mutually satisfactory settlement, members make increased use of the panel.

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