4.4.5 GATT and the World Trade Organization

Who makes international economic decisions?


Rules of trade: The major powers of the world realized worldwide institutions were needed to help countries to compete in a worldwide market.

The
General Agreement on Tariffs and Trade (GATT)
an international agreement dealing with trade between nations, signed in 1947

GATT was result of the Bretton Woods Conference held in 1944 to bring economic recovery after World War II by encouraging reduction in tariffs and other international trade barriers. It was signed in 1947 by 23 countries, including most of Europe, Canada, United States, and other nations. Later, GATT grew to include 75 countries. In 1994, the World Trade Organization replaced GATT.
General Agreement on Trade and Tariffs or GATT were the rules agreed to by 23 nations in 1947, two years after World War II.

GATT was an agreement to treat the products of each of the signing countries equally.

  • For example, if Canada had a
    tariff
    a tax on goods that are produced outside the country imposed by the government of the country to which they are exported

    Many countries have reduced tariffs as world trade becomes more free.
    tariff of 25% on automobile parts coming from the United States, it would have the same tariff on automobile parts coming from the United Kingdom.

  • As well, the countries agreed not to use
    quota
    in economics, a form of protectionism; the practice of setting limits to how much of a product can imported

    For example, Canada could say that we could import only 20 000 cars from Japan and Europe. This would increase the demand for cars made in North America. As a result of limiting supply, the price of the imported product would be higher than it is under free trade. This would strengthen the North American auto industry  by decreasing competition.
    quotas on imported goods. For example, Canada could not restrict the number of automobile parts coming into the country. It could only put tariffs on them.

Birth of the World Trade Organization: The number of countries grew from the original 23 in 1947 to 125 when GATT became the
World Trade Organization
an international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers.

WTO is the only international agency overseeing the rules of international trade. It polices free-trade agreements, settles trade disputes between governments, and organizes trade negotiations.
World Trade Organization (WTO) in 1995. The WTO now has 159 members.

Many people disagree with the activities of the World Trade Organization. Although the WTO establishes rules for international trade, some people believe these rules favour wealthy and powerful nations and organizations. For example, many rich nations do not allow certain imports from poor nations, but they insist that their own goods be exported into these same nations. They do not support safe labour practices or fair trade.


Protest in Trieste, Italy
Courtesy Bojan Brecelj at ipak
Demonstrations by
anti-globalization movement
a social, political, environmental, and economic movement by those who object to certain aspects of globalization

Although participants in this movement have various perspectives, they are united in opposition to large corporations and nations that they believe use economic and political power to exploit the poor at home and in the developing world, damage the environment, and/or threaten individual and collective culture and national sovereignty.
anti-globalization protesters and environmentalists have occurred at almost all meetings of the WTO in recent years. This includes the Battle for Seattle in 1999, and others around the globe. The 2006 meeting was held in Doha, Qatar, where a major topic of discussion was agricultural tariffs that placed "developing countries at a disadvantage when trying to compete with those same products from developed countries in Europe and North America".