What you need to know about THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT). GATT -- what, why, how?
What is GATT? GATT -- the General Agreement on Tariffs and Trade -- is a legal contract that the United States and 91 other governments have entered into. Participants meet periodically to decide what they expect of one another in trade matters. Some call GATT the United Nations of world trade.
Who are GATT's members?
Membership in GATT now includes 92 countries, ranging from industrialized countries, such as the US and West Germany, to developing countries, such as India and Brazil, to less developed countries, such as Malawi and Zaire. The Soviet Union is not a member of GATT but has asked to join. The US opposes Soviet membership, because it believes the USSR would use GATT membership for political purposes. Other East-bloc nations, such as Yugoslavia and Hungary, are members, and the People's Republic of China has asked for observer status.
What is the aim of GATT?
The basic goal is to liberalize trade by reducing tariff and nontariff barriers.
How does GATT work?
GATT consists of 38 articles of understanding that lay down the basic principles of trade. When the US Congress writes trade laws, it has to ensure they conform with these articles. The same is true for other countries. When the participants in GATT want new articles of understanding, they convene a round, which can last for several years.
The eighth round is being launched this week in Punta del Este, Uruguay. Previous rounds have been held in Geneva (1947; 1956; 1960-61, the Dillon Round; 1964-67, the Kennedy Round; and 1973-79, the Tokyo Round); in Annecy, France (1949); and in Torquay, England (1951).
What is the effect of not complying with GATT?
If one country believes another country has violated GATT, the ``injured'' party takes the dispute to GATT headquarters in Geneva, where a panel is convened to decide the facts. If it is ultimately determined that one country is wrong, the injured party can retaliate through increased tariffs, quotas, or nontariff barriers.
Why did GATT begin?
GATT was in part a reaction to the disastrous protectionist trade policies of the 1920s, culminating in the Smoot-Hawley Tariff Act of 1930. Coupled with the Great Depression, these policies had reduced world trade. GATT was established in 1947.
What does GATT cover?
Mainly trade in manufactured goods and products. GATT does not cover agricultural products, services, intellectual properties, such as copyrights and patents and investments. In addition, voluntary restraints are not covered, so, for example, Japan's exports of autos are not controlled.
How does GATT relate to the record US trade deficit?
GATT relates only indirectly. Japan, which has a $70 billion trade surplus with the US, is a participant in GATT. The country, however, has many nontariff barriers that are not covered under GATT. Also, Japan does not import much, and GATT does not require imports. Still, some areas of GATT could be strengthened to relieve pressure on the US trade deficit. The US wants these areas covered in the new round.