Difference Between GATT and WTO

May 9th, 2011 | By olivia

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GATT vs WTO General Agreement on Tariffs and Trade is commonly referred to as GATT. It was created in 1948 with the aim of bolstering international trade by reducing trade barriers between countries through negotiations. It was replaced by World Trade Organization in 1995 after prolonged deliberations that continued for 8 years in GATT. There are more than 125 members of WTO and more than 90% of total international trade is governed by the rules of WTO. There are many who get confused between the now defunct GATT and WTO. This article will explain the major differences between GATT and WTO. GATT was under International Trade Organization that worked under the aegis of the UN. However, ITO got sidelined as US refused to ratify it which is why GATT itself evolved a new organization called WTO. The last round of GATT was held in Uruguay in 1993 before it transformed into WTO. Though there were rules in GATT for resolution of disputes, it did not have enforcement power which led to many disputes. WTO has much stronger provisions for enforcement of the rules. If a member state is aggrieved, it can lodge complaint with WTO that will strive to ensure that the transgressor complies with the provisions of WTO. WTO can even impose trade sanctions against erring members as a last resort. The very fact that GATT, which started with a mere 23 members in 1948 was instrumental in associating over one hundred more members till it got rechristened as WTO is a reflection of the efficacy of the organization. What is the difference between GATT and WTO? As an organization, GATT had provisional legal agreement whereas WTO has legally permanent provision. Whereas the members were called contracting parties in GATT, they are real members in WTO. While GATT was limited to trade in goods only, the scope of WTO is broader with services and intellectual property rights also included in it. The most notable difference is the establishment of a dispute settlement mechanism that has the power to impose trade sanctions against erring parties. While GATT allowed domestic legislation to continue, WTO does not permit this practice any more. GATT was weak while WTO is more powerful.

The World Trade Organization (WTO) and its predecessor,the General Agreement on Tariffs and Trade (GATT) have been enormously successful over the last 50 years at reducing tariff and other trade barriers among an ever-increasing number of countries. The predecessor to the WTO began in 1947 with only 23 members; today it has 146 members, comprising approximately 97 percent of world trade. The General Agreement on Tariffs and Trade (GATT) was an international organization created in 1947 to reduce trade barriers through multilateral negotiations. In January 1995, the GATT was replaced by a stronger World Trade Organization (WTO), the result of eight years of GATT negotiations. Today, member countries number 125 (nearly the whole world except China, some former communist countries, and a number of small nations) and WTO rules apply to over 90 percent of international trade. 1 what is WTO and GATT
The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the worlds trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. Although still a little-known and little-understood institution, the WTO has become increasingly controversial as it has expanded the scope of its work from its original narrow GATT focus on reducing tariffs on manufactured goods. The WTO now also works to eliminate nontariff barriers, and can be used to challenge environmental, health, and other regulations that may serve legitimate social goals but may be regarded as impediments to international trade. The 1995 replacement of GATT by the WTO heightened concern among critics because its stronger enforcement powers represent a further shift in power from citizens and national governments to a global authority run by unelected bureaucrats. Business, academic, and government supporters applaud the WTO as a more muscular sheriff of the world trading system. Originally, GATT functions were intended to be part of a broader International Trade Organization (ITO), whose charter was negotiated in the mid-1940s. The ITO, which would have been under the aegis of the UN, was to have a broad regulatory mandate, covering trade, employment rules, and business practices. However, largely due to pressure from the business community and concerns about the ITO threatening U.S. sovereignty, the U.S. Senate killed the organization by refusing to ratify it, leaving the more narrowly focused GATT to evolve on its own. Negotiators from member nations revised GATT rules and liberalized world trade several times in multi-year conferences called Rounds. The GATTs (and now the WTOs) approach to reducing trade barriers was based on the most-favored nation principle, which requires that when a nation grants a trade privilege to one country, it must grant the same privilege to all GATT members. Another guiding principle is that of national treatment, which requires nations to give equal treatment to foreign imports of goods or services as to domestic goods or services.

The GThe most recent GATT Round, the Uruguay Round, concluded in 1993 and received U.S. congressional approval in November 1994. It is slated to result in average tariff reductions of 38 percent for developed economies, reducing average tariffs worldwide from 6.3 percent to 3.9 percent. In comparison, average tariff rates just after World War II were 40 percent. The most controversial outcome of the Uruguay Round was the establishment of much stronger enforcement mechanisms in the WTO. Although GATT always had a dispute resolution process, member nations often ignored its rulings since they lacked serious enforcement power. Unlike GATT, WTO panel decisions are binding. If one nation makes a complaint to the WTO that another nations law or regulation is protectionist and in violation of WTO rules, the WTO can make that nation bring the law into compliance with the

WTO standard (with minor exceptions). If the country fails to comply, the WTO can authorize the complainant nation to impose trade sanctions. Liberalization of investment was another goal of the Uruguay Round, but deadlocked negotiators had to extend the deadline for new rules in this area. Thus, at the WTO ministerial meeting in Singapore in December 1996, European nations, backed by the U.S. and Japan, pushed for talks on a proposed Multilateral Investment Agreement (MIA). The MIA would force national governments to grant foreign investors national treatment, the same concept of nondiscrimination that is already applied to trade. If the MIA were adopted, corporations could invest without restrictions in any WTO member nation. See detailed note below:eneral Agreement on Tariffs and Trade (GATT) provided global trade rules as well as a framework for trade disputes from 1948 to 1994. It was one of three Bretton Woods organizations developed after World War II. (The others were the International Monetary Fund and the World Bank.) The goal of GATT founders was to liberalize world trade, specifically by reducing protective tariffs. 2 the main difference: (1) the WTO is a permanent international legal personality, and only a temporary GATT Agreement. But the organizational structure also improved. The WTO is the highest authority in "the Council of Ministers" (by the members of the Foreign Trade and Economic Cooperation to attend) (equivalent to shareholders of the General Assembly), have legislative, and judicial powers. The Council of Ministers during the recess, composed of representatives from all the members of the "General Council" (the Board) performing the duties of the Council of Ministers, by the Director-General (general manager) is responsible for handling day-to-day affairs and coordination. (2) the WTO provisions enacted by the GATT more than legal efficiency, the operation is more efficient. (3) the WTO trade-related content more widely than GATT, which has jurisdiction of a broader. GATT only involve trade in goods, the WTO is not only involved in the trade, including goods, services and intellectual property rights also include. (4) members of the WTO obligations of unity. WTO members, regardless of size, to the jurisdiction of the multilateral agreements must be observed, "package" to accept the WTO agreement, the agreement can not be selective in one or a number of agreements, not its jurisdiction agreement, the agreement of a reservation. However, many of the GATT agreement, the code is implemented by means of the Parties can accept, can not accept. 5 Timeline of GATT and the WTO is different 5.1 1944: At the Bretton Woods Conference, which created the World Bank and International Monetary Fund(IMF), there is talk of a third organization, the International Trade Organization (ITO). 1947: As support for another international organization wanes in the U.S. Congress, the General Agreement on Tariffs and Trade (GATT) is created. The GATT treaty creates a set of rules to govern trade among 23 member countries rather than a formal institution. 1950: Formal U.S. withdrawal from the ITO concept as the U.S. administration abandons efforts to seek congressional ratification of the ITO. 195186: Periodic negotiating rounds occur, with occasional discussions of reforms of GATT. In the 1980s, serious problems with dispute resolutions arise. 198694: The Uruguay Round, a new round of trade negotiations, is launched. This culminates in a 1994 treaty that establishes the World Trade Organization (WTO).
1995: The WTO is created at the end of the Uruguay Round, replacing GATT.

Trade policy as an instrument for poverty reduction Trade policy can be a useful instrument through which to pursue rural poverty reduction objectives in certain situations.

 First, trade policy can be used to deal with temporary import surges that have a significant negative impact on the livelihood of poor farmers. In such cases a special safeguard mechanism may be considered, under which temporary protection can be sought if there is severe downward pressure on domestic prices of products that are important to incomes of the poor. Guidance on the general design of any such safeguard mechanism is set out in section 13.3.3. Second, where the overall policy regime discriminates against agriculturethat is, policy favors industrial production and/or urban consumers of fooda case could be made in favor of higher protection for poor farmers in low-income countries. Although a more efficient approach would be to lower protection for industry, thereby offsetting any prevailing policy bias against the rural poor, contexts where this cannot be achieved or is achieved gradually, there may be a case for maintaining higher rates of protection on agricultural commodities as a second-best policy. Third, trade policy can be used in situations where complementary policies, including safety nets, are inadequate and a significant number of the poor are engaged in production of tradable commodities that are sold domestically. In this situation, agricultural trade policy reform should be gradual, involving a preannounced schedule of tariff reductions. The potential negative impacts of agricultural reform can be attenuated by currency devaluation, and by implementing complementary reforms in the markets for land, credit, and water, to enable farmers to take advantage of the new opportunities, to adjust to changed incentives, and to benefit from
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