Definition of GATT and the General Agreement on Tariffs and Trade

What You Need to Know About the Pact of January 1948

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The General Agreement on Tariffs and Trade was a pact between more than 100 countries including the United States to substantially reduce tariffs and other barriers to trade. The agreement, also referred to as GATT, was signed in October of 1947 and took effect in January of 1948. It was updated several times since its original signing but hasn't been active since 1994. GATT preceded the World Trade Organization and considered one of the most ambitious and successful multilateral trade agreements in history.

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GATT provided global trade rules and a framework for trade disputes. It was one of three Bretton Woods organizations developed after World War II. The others were the International Monetary Fund and the World Bank. About two dozen countries signed the initial agreement in 1947 but the participation in GATT grew to 123 countries by 1994.

Purpose of GATT

The stated purpose of GATT is eliminating "discriminatory treatment in international commerce" and "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods."

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You can read the text of the agreement here.

Effects of GATT

GATT was initially a success, according to the World Trade Organization.

 

"GATT was provisional with a limited field of action, but its success over 47 years in promoting and securing the liberalization of much of world trade is incontestable. Continual reductions in tariffs alone helped spur very high rates of world trade growth during the 1950s and 1960s — around 8% a year on average. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the GATT era, a measure of countries’ increasing ability to trade with each other and to reap the benefits of trade."

GATT Timeline

October 30, 1947: The initial version of GATT is signed by 23 countries in Geneva.

June 30, 1949: The initial provisions of GATT take effect. The agreement contains about 45,000 tariff concessions affecting $10 billion of trade, about one fifth of the world’s total at that time, according to the World Trade Organization. 

1949: 13 countries met in Annecy, in southeastern France, to talk about reducing tariffs.

1951: 28 countries met in Torquay, England, to talk about reducing tariffs.

1956: 26 countries met in Geneva to talk about reducing tariffs.

1960 - 1961: 26 countries met in Geneva to discuss reducing tariffs.

1964 - 1967: 62 countries met in Geneva to discuss tariffs and "anti-dumping" measures in what was known as the Kennedy round of GATT talks.

1973 - 1979: 102 countries met in Genava to discuss tariffs and non-tariff measures in what was known as the "Tokya round" of GATT talks.

1986 - 1994: 123 countries meeting in Geneva discussed tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture and the creation of the World Trade Organization in what was known as the Uruguay round of GATT talks. The Uruguay talks were the eighth and final round of GATT discussions.

They led to the creation of the World Trade Organization and a new set of trade agreements.

Corporations often argue for more open trade in order to have access to new markets. Labor often argues for trade restrictions in order to protect domestic jobs. Because trade agreements must be approved by governments, this tension sets up political conflict.

List of Countries in GATT

The initial countries in the GATT agreement were:

  • Australia
  • Belgium
  • Brazil
  • Burma
  • Canada
  • Ceylon
  • Chile
  • China
  • Cuba
  • Czechoslovakia 
  • France
  • Great Britain
  • India
  • Lebanon
  • Luxembourg
  • Netherlands
  • New Zealand
  • Northern Ireland
  • Norway
  • Pakistan
  • Southern Rhodesia
  • Syria
  • South Africa
  • United States