General Agreement on Tariffs and Trade: GATT Definition

The General Agreement on Tariffs and Trade (GATT) was a legal agreement signed in 1947 by member nations to improve global trade relations and stimulate the global economy following World War II. To lower barriers to international trade, the GATT worked to impose a substantial reduction of tariffs and eliminate quotas. The founding 23 signatories included Australia, Brazil, Canada, the Netherlands, New Zealand, Syria, the United States, and the United Kingdom.

By the time the GATT ended in 1995, it had 125 member nations. While the GATT agreement is no longer in effect, the original legal text still exists and is now known as GATT 1947 or as the updated version known as GATT 1994.

During its 47-years history, the GATT significantly reduced tariffs, increased global trade, and boosted economies.

• 1944 Bretton Woods Conference: In the final years of WWII, delegates from 44 nations met in Bretton Wood, New Hampshire, to discuss new agreements on postwar international trade systems. At this conference, they signed the Final Act of the United Nations Monetary and Financial Conference (also known as the Havana Charter), which introduced the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), also known as the World Bank. Members also discussed the creation of an International Trade Organization (ITO), a precursor to the GATT that ultimately failed to materialize.
• The signing of the GATT: After multiple conferences, 23 member nations signed the GATT agreement on October 30, 1947, in Geneva, Switzerland. However, the agreement wasn’t yet fully formed and would require more conferences to amend.
• GATT negotiation rounds: Many member countries and contracting parties joined multilateral trade negotiations to revise and amend the GATT agreement and its trade policy. Some of these conferences received nicknames, like the Annecy Round (1949), the Torquay Round (1951), the Geneva Round (1955–56), the Dillon Round (1960–62), the Kennedy Round (1964–67), and the Tokyo Round (1973–79).
• The formation of the WTO: By the late 1970s, several members started to feel that GATT was struggling to keep up with globalization. The members of GATT agreed to one final trade round, colloquially referred to as the Uruguay Round, in 1986. The Uruguay Round was the first round in which developing countries played a more active role. The Uruguay Round wrapped up in 1994 with the signing of a new organization called the World Trade Organization. The official birth of the WTO came during a ministerial meeting in Marrakesh, Morocco, and is now sometimes called the Marrakesh Agreement. The creation of the WTO replaced the GATT agreement. The WTO uses a format of biannual “Ministerial Conferences,” similar to the structure and decision-making process of the original GATT format. As the WTO agreement operates, more states continue to apply for membership. The WTO is a major proponent of trade liberalization (or the lifting of trade barriers).

The primary purpose of the GATT agreement was to make international trade much easier following Word War II. By removing barriers like high tariffs and quotas, the GATT sought to increase global free trade and promote economic development. Its most-favored-nation clause ensured that if two member nations reached a favorable tariff agreement, that agreement would extend to all member nations.

This liberalization of trade increased global market access for goods like agricultural products and textiles. Some of the contracts in the GATT included tariff concessions, anti-dumping measures, government-procurement agreements, and extensions of intellectual property rights. The GATT also increased the transparency of trade policies and allowed for peaceful dispute settlement over trade disputes between member states.

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