A Comparative Study of GATT and WTO

Introduction: GATT (General Agreement on Trade and Tariffs)

The General Agreement on Tariffs and Trade (GATT), which was ratified by 23 nations in 1947, lowers trade restrictions by doing away with or reducing quotas, tariffs, and subsidies. After World War II, it was designed to accelerate economic recovery. Over time, GATT was expanded upon and improved, and as a result, the World Trade Organization (WTO), which had been established to carry out GATT, was born in 1995. By that time, 125 countries had ratified their accords, which encompassed 90% of world commerce.

Why was GATT established?

Quantitative trade barriers like trade restrictions and quotas were the most expensive and unfavourable aspects of the pre-war protectionist era, and the GATT was established to establish regulations to abolish or restrict them. The framework allowed for a series of multilateral discussions for the removal of tariff barriers, and the agreement also provided a structure for the arbitration of international commercial disputes. In the years following World War II, the GATT was viewed as a tremendous success.

GATT Principle of 'Trade without Discrimination'

The principle of trade without discrimination, according to which each member state opened its markets to all others equally, was the most crucial one outlined by GATT. This meant that once a country and its biggest trading partners had agreed to decrease a tariff, that tariff cut automatically extended to every other GATT member, as embodied in unconditional most-favoured nation clauses. Each contracting country was given a long list of specific tariff concessions as part of GATT, which represented the tariff rates that each country committed to applying to others. Another essential rule was that commerce should be protected by tariffs rather than import quotas or other quantitative trade restrictions; the GATT actively worked to do away with these.

WTO (World Trade Organisation)

World Trade Organization (WTO) is an international body created to regulate and liberalise international trade. The General Agreement on Tariffs and Trade (GATT), which was established in 1947 with the idea that it would soon be replaced by a specialised agency of the United Nations (UN) to be known as the International Trade Organization (ITO), was superseded by the World Trade Organization (WTO). Despite the ITO's nonexistence, the GATT was exceptionally effective in liberalising global trade over the ensuing 50 years. There were demands for a more powerful multilateral agency to oversee trade and settle trade disputes by the late 1980s. On January 1, 1995, the WTO officially launched after the Uruguay Round (1986–1994) of multilateral trade negotiations came to an end.

Why did WTO replace GATT?

Even if the GATT's goal was substantially achieved, it was said that its institutional framework lacked coherence. It was, in essence, a contract that served as an international organisation. The World Trade Organization (WTO) embraces the GATT's principles and is better equipped to implement them since, among other things, it is more powerful, has a quicker dispute resolution process, and is more knowledgeable about matters like intellectual property.

The following are some of the reasons behind replacing GATT with WTO:

• GATT lacked an institutional framework that made sense. The World Trade Organization (WTO) embraces the GATT principles and offers a more institutionalised structure for doing so.
• GATT was ad hoc and provisional in nature; member country parliaments never ratified it.
• The WTO and its agreements are irrevocable, have a solid legal foundation, and have been accepted by the parliaments of all member nations.
• While the GATT only addressed trade in products, the WTO also addresses intellectual property and services.
• WTO dispute resolution is quicker, and its decisions cannot be overturned.

Comparison Between GATT & WTO

In order to understand the inherent relationship between GATT and WTO, it is imperative to understand them while creating a comparison between the two instruments. This will help us in understanding the provisions present in both with regard to similar matters. The following points will help us to understand the same:

Comparison Chart between WTO and GATT

Distinction between GATT and WTO

The following points shall discuss some of the major key differences between GATT and WTO:

• When we talk about the GATT, we're talking about a multilateral international agreement that 23 countries joined to encourage trade and lower trade barriers between states. Contrarily, the WTO is an international organisation that replaced GATT and regulates commerce between its member countries.
• The GATT is a straightforward agreement with no institutional structure and only a small secretariat. The WTO, on the other hand, has a secretariat and is a permanent organisation.
• While the WTO refers to the participating countries as members, the GATT refers to them as contracting parties.
• GATT commitments are of a temporary nature, and after 47 years, the government may decide whether to treat them as such or not. On the other hand, WTO commitments have always been permanent.
• The WTO's jurisdiction is broader than GATT's in that the GATT regulations only apply when commerce is conducted in products. Unlike the WTO, whose regulations also apply to parts of intellectual property and services.
• Although a plurilateral agreement is later added to the GATT agreement, it is largely multilateral in nature. WTO agreements, on the other hand, are only multilateral.
• In the GATT, domestic legislation may continue, although the WTO forbids such a practise.
• The GATT's dispute resolution process was less automatic, slower, and prone to blockages. Unlike the WTO, it has a highly successful dispute-resolution process.

Conclusion

Without the GATT, the world would be a very different place. A period of discrimination and economic misery that culminated in World War II was ended by its commitment to free trade, laying the stage for decades of economic expansion and accelerated globalisation. After the Second World War, the fundamental goal of GATT implementation was to boost international trade and strengthen economic stability. The WTO was founded on this principle, which allowed for free commerce between nations while still maintaining some restrictions for everyone's benefit.

It is important to understand that while GATT played a very imperative role in shaping the future and even present of trading at the international level back in the days, it was important to modernize it and add the necessary changes or requirements which would help in making it suitable for the constantly changing and evolving world economy. This makes both GATT and WTO equally important for contributing to the success of international trade today. GATT, still in existence, plays the role of handling the trade of goods at the international level. It can thus be understood that although both GATT and WTO are separate, they actually have had a similar origin.

References

[1] Kym Anderson, 'WTO: World Trade Organisation', Available Here

[2] World Trade Organisation, 'History of the multilateral trading system', Available Here

[3] GATT/WTO, Available Here

[4] Muhammad Amir Munir, Nadeem Ahmad Sohail Cheema, From GATT to WTO: A Legal Analysis, Available Here

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