Public SectorOctober 27, 2022by fiecon

Evolution of Trade Agreements: Transitionary Phase from GATT to WTO


Despite the successes that were seen in the Tokyo round, it had challenges that clearly highlighted the in-ability of the GATT system to liberalize trade. These shortcomings were a clearer indication that a body with a wider mandate than that of the GATT, and with stronger enforceable rules was needed. It left vague forms on government interventions that would be considered as non-tariff barriers and also failed to apply the most favored nation rule to trade safeguards.

One key sector that showed the weaknesses of GATT was trade in agricultural products that previous rounds and the Tokyo round as well tried to solve. The United States that was seeking liberalization of trade felt there was no need to have trade negotiations if the abolishment of the Common Agricultural Policy (CAP) by the European Community was not discussed. CAP was seeking stable prices and supply; with pressure to maintain the protective policies that CAP had coming from domestic agricultural interest groups such as Comite des organisations professionnelles agricoles (COPA) and Comite general des cooperatives agricoles (COGECA). Both institutions were established shortly after the Stresa conference that lay the groundwork for CAP. Despite the difficulty in liberalizing trade in agricultural goods, some concessions were arrived at in the Tokyo round. An agreement was established whereby consultation on certain commodities led to modest cuts in tariffs. This limited success of GATT meant that moving forward negotiations that dealt with agriculture would be included in multilateral trade negotiations and farm-sector protectionism would be attacked.

During the Tokyo round, the struggles that third world countries were facing in negotiating and implementing trade agreements was seen. Their participation in negotiations was also of concern with countries such as the United States taking note of the fact that these countries were only brought onto the negotiating table towards the end. This meant that their commitments to address issues such as non-tariff barriers were low and the benefits that these developing nations received was without any obligations. On the developing nations’ side, they felt that the tariff concessions given to them were little and of limited impact; that it did not warrant their participation during the negotiations. Additionally, negotiations under GATT mostly centered on industrial goods produced mainly by developed nations. Developing nations also struggled with negotiating with their developed partners due to their different stages of development and varying import and export needs. Further the developing nations lacked influence and institutional capacity, and hence participation in the actual negotiations mostly involved the developed nations. Developing nations also struggled with the fact that contracting parties were asking all nations to submit to codes that encroached on their sovereignty, highlighting the challenge of enforcement that GATT faced especially for nations that were not actively involved in the negotiations.

Despite its failures, there were successes for third world nations; for example, the GATT forum created two deputy directors with one of them focused only on developing nations. Additionally, codes for example that dealt with customs valuations were adopted by developing nations such as Brazil and India and given sufficient time to implement them as opposed to doing it immediately. However, more needed to be done for the developing nations and their active participation during the negotiations was seen as crucial to sustaining their development. The forum needed to accommodate developing nations, and their ability to influence the negotiations needed to be addressed through capacity building within developing nation governments.

GATT had clearly shown that it needed to go beyond just tariff reduction. Countries such as the United States were implementing the fast track authority that gave the US President the power to negotiate for trade agreements in a fast-tracked manner with limited congressional oversight. Additionally, the President could retaliate on discriminatory trade practices on a unilateral basis. It is using these provisions that the US signed trade agreements with Israel and Canada and included aspects not covered under GATT such as trade in services and intellectual property rights. This lay the foundation for the expanded mandate needed under GATT and by the time the Uruguay round was taking place, the US had strengthened its approach to trade of pursuing liberalization; as well as retaliatory measures against discriminatory practices taken to cushion domestic producers.

The Tokyo round was seen as transitional into the WTO format from GATT. Some of the codes adopted such as on dispute resolution were foundational in developing dispute resolution mechanisms that would be adopted in future rounds under WTO. There were also commitments made in the Tokyo round that moved into the Uruguay round and were later adopted into other agreements. These were the agreements on dairy products and bovine meat that initially were plurilateral in nature, but ended up becoming multilateral. Other two agreements that maintained their plurilateral nature were the agreements on civil aircraft that had seen some level of liberalization during the Tokyo round and government procurement.

At this point in time globalization was taking a different shape and shortcomings of GATT were clearly being seen. Trade in services had become a pressing issue that needed to be addressed but GATT did not cover it. Protectionist policies in some segments such as agriculture continued to exist and third-world countries needed to take active participation in trade negotiations. GATT had achieved its target of helping the world recover after the world war two and had attempted to address some new challenges that arose towards the end of the 20th century in varying levels of success. Where GATT fell short, it was seen that a new body (World Trade Organization) would come in and help in addressing and as the world entered into the Uruguay negotiations the need for a global economic organization that had been the goal of the GATT founders half a century ago was evident.

Author: David Kageenu