Economics, International Trade, Agreements, GATT, Provisions of the GATT. GATT was set up in 1948 in Geneva to follow the objectives of free trade in order to encourage growth and development of all member countries. Complaints and Waivers 6. Development and full utilization of world resources; and. The most significant provision of the GATT agreement was that of the Most Favoured Nation (MFN) clause. Role of GATT in the Dunkel Draft 6. (v) In the event of a sudden increase in imports, a member country was allowed to take resort to temporary safeguard of import quota restriction for protecting domestic industry. Settlement of Disputes. The bilateral-multilateral technique of negotiations had some drawbacks. The ‘Most Favoured Nation’ Clause 2. In case the offending member either did not comply with the ruling or did not act upon the recommendation of the panel, the aggrieved party was authorized to retaliate by withdrawing some or all concessions offered to the offending country. The Uruguay Round has enlarged the scope of GATT to include services and agriculture. The rules adopted by GATT are based on the following fundamental principles: Trade should be conducted in a non-discriminatory way; The use of quantitative restrictions should be condemned; and. Share Your PPT File, Essay on Economic Integration | Macroeconomics, Business: Meaning, Definitions, Characteristics, Objectives, Scope and Growth Strategies. Welcome to EconomicsDiscussion.net! In case the subsidies resulted in harm to the interests of importing countries, the agreement authorized them to take resort to counter-veiling duties. Article XXV of the GATT provides the procedure for granting waiver to some contracting party from the application of the provisions of the GATT. Copyright © 2018-2021 BrainKart.com; All Rights Reserved. Provision # 1. If the consultations failed to bear results, the complaining country could invoke the provisions of Article XVIII of the GATT, under which the latter was authorised to suspend concessions or other obligations towards the offending country. This clause is to be adopted to avoid discrimination in international trade. The achievement in tariff reduction had remained very small and not encouraging since the enactment of the GATT. The GATT agreement also made provision of Escape Clauses. (vii) The countries were allowed to form customs union or free trade areas under Article XXIV of the GATT agreement provided their aim was to promote trade among the constituent countries and not to raise trade barriers against other contracting parties. Disagreements should be resolved through consultations. For the achievement of the principles and objectives of the GATT, the following provisions had been made: 1. Settlement of Disputes. The former should also be prepared, on request to enter into consultation with the latter about the possibility of reduction or limiting such subsidies. It was recognised by the GATT that the subsidies were alternative to tariffs. Complaints and Waivers 6. It meant that the whole arrangement under the GATT agreement was based upon twin principles of non­discrimination and reciprocity. The ‘Most Favoured Nation’ Clause 2. The exceptions were, however allowed in certain defined circumstances: (i) The countries could take recourse to them, if otherwise the balance of payments adjustments were difficult. It was bilateral as two contracting parties entered into negotiations for tariff reduction on a selective commodity-to-commodity basis. However, the country resorting to counter-veiling or anti-dumping duties should not impose duties at a higher rate than was required to offset the margin of dumping and the affected industry in the importing country should not acquire thereby a net additional protection. As regards other subsidies such as the production subsidies, the members were allowed to use them provided they notify other parties of any subsidy that is likely to cause the exports of the latter to fall and imports to rise. Quantitative Restrictions on Imports 3. The GATT rules prohibited the use of import quota fixation. It encouraged frequent negotiations among the contracting parties to reduce in a substantial measure the rates of import tariffs. Subsidies and Counter-Veiling Duties 5. The principal purpose of GATT was to ensure competition in commodity trade through the removal of or reduction in trade barriers. GATT became a permanent international trade institution for the multilateral expansion of trade until it was replaced by World Trade Organisation (W.T.O) in 1995. Third, that negotiations procedure was not equitable for those countries which already had a low-tariff structure. There are 117 member nations in GATT. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. The GATT had emphasized upon the need of continuous consultation among the contracting parties on the nature of the BOP problems, alternative corrective measures and the possible effects of quantitative restrictions upon the economies of other contracting parties. GATT served as an important international forum for carrying on negotiations on tariffs. The GATT had provided for the machinery for the settlement of any disputes among the contracting parties. The MFN clause implied that the tariff preferences resulting from bilateral trade negotiations between two member countries had to be extended on a non-discriminatory and reciprocal basis to all the other member countries. Study Material, Lecturing Notes, Assignment, Reference, Wiki description explanation, brief detail, The Role of the General Agreement on Tariffs and Trade (GATT). Ordinarily the waivers were not granted unless those were approved by two-thirds of the voting contracting parties. GATT and Its Objectives 3. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. TOS4. The GATT Conferences or Rounds of World Trade Negotiations 4. Quantitative Restrictions on Imports 3. Article XXV of the GATT laid down the procedure for granting waiver to some contracting parties from the application of the provisions of the GATT. Some of the important functions and objectives of WTO are :- The former GATT was not really an organisation; it was merely a legal arrangement. Share Your PDF File Content Guidelines 2. The developed Western countries were allowed to extend special concessions in trade to their former colonies. This was the multilateral aspect of tariff negotiations. Developing countries may resort to quota fixation but only under procedure accepted by the GATT. First, the principle of reciprocity was injurious to the interests of the LDC’s. The basic principle of GATT is that member countries should consult one another on trade matters and problems. This panel or committee, after a careful study, used to make a recommendation or ruling to be observed by the offending party. In case of failure, the matter could be referred to a panel of experts drawn from countries having no direct interest in the matter. The essence of this clause was that each contracting party of the agreement would treat all other contracting parties as the most favoured nation. GATT had generally proved successful in resolving disputes among the contracting parties. (BS) Developed by Therithal info, Chennai. Introduction to GATT 2. The complaints had been concerning the discriminatory incidence of internal taxes, anti-dumping duties and special restrictions on imports. A concession might assume the form of a reduction in the rate of import tariff or an agreement to bind, i.e., not to hike the existing rate of duty. The GATT contained an entrenched clause that sought to stabilise member countries’ tariffs. The contracting parties were prohibited from imposing the quantitative restrictions on imports such as import quotas and import licences, under Article XI of the GATT agreement. This was achieved through the reduction of tariff barriers, quantitative restrictions and subsidies on trade through a series of agreements. If no satisfactory solution was found, the matter could be referred to a group of experts to assist the two contracting parties. That resulted in the abandonment of bilateral commodity by commodity negotiations and emphasis shifted to only multilateral tariff reduction. 3) Tariff negotiations and Reduction of Tariff, Composition and Direction of Trade - Export, Imports of India, World Trade Organization (WTO) and Major Functions, International Bank for Reconstruction and Development (IBRD), Special Action Programme (SAP) and Structural Adjustment Facility (SAF), Educational Development in India since 1951.