The WTO and GATT: A Principled History

1 While the World Trade Organization in current existence provides itsmembership with forums for three interrelated functions negotiation,illumination, and litigation it is probably best known for the first of chapter provides a brief overview of the negotiating forum of the GeneralAgreement on Tariffs and Trade and its WTO successor, as well as how eachhas been used by the world s major trading nations since the ultimate focus of this book is on developing countries and disputesettlement, it may appear strange to start with a topic that has little obvious rela-tion to either.

2 This chapter describes the relative success of the negotiatingforum of the GATT an agreement to which developing countries largely didnot have a proactive contribution. A careful analysis of the origins of theGATT, as well as some of its later History , offers a tremendous number of les-sons for developing countries and for the settlement of disputes. The underlyingpolitical and economic forces that create the incentives that shape trade relationsbetween sovereign nations be the countries developed or developing remainrelatively consistent over time.

3 Thus the evidence from later chapters will sub-stantiate that there is much to learn from the relative successes of the GATTand its negotiating History . These successes are particularly important to under-stand and appreciate given the extremely negative and pessimistic view thatdeveloping countries have of the current WTO bargain, which is described inchapter WTO and GATT: A Principled History11001-0323-5 9/17/09 9:58 AM Page 10In the next section, I provide a brief introduction to the original GATT thatwas negotiated to conclusion in 1947, as well as the subsequent trade liberaliza-tion negotiations that took place over the next forty-five years.

4 The third sectionpresents the principles on which the GATT and the WTO are built reciproc-ity, most-favored-nation treatment, and national treatment and their practicalrelevance for shaping the outcomes of the negotiations. The final sectiondescribes some of the emerging evidence from more formal scholarship thatfinds that the GATT and the WTO (GATT/WTO), as well as these founda-tional principles, have an impact on government policies and subsequently onthe trade flows and economic activity that such policies brief History of GATT NegotiationsThe current WTO agreements are the legacy of commitments that countrieshave voluntarily negotiated with each other, on a repeat basis, in the decadessince 1947.

5 To understand the causes of the present patterns of import protec-tion across WTO member countries as well as across products and industrieswithin those countries, it is important to turn to the 1930s and 1940s era of the Great Depression and World War II provideimportant reminders of globalization s last dark episode of protectionism. imposition of the Smoot-Hawley tariffs and the international retaliatoryresponse in the 1930s led to the virtual halting of international 1-1 illustrates the pattern of the new trade barriers that were implementedby the United States and a number of other European countries during theGreat Depression.

6 What is clear is that the level of tariffs during the Depressionwas much higher than what most developed economies impose the conclusion of World War II, twenty-three countries, led primarily bythe United States, Canada, and the United Kingdom, negotiated the GeneralAgreement on Tariffs and goal was to create an agreement thatwould ensure postwar stability and avoid a repeat of the mistakes of the recentpast, including the Smoot-Hawley tariffs and retaliatory responses, which hadbeen a contributor to the devastating economic climate that culminated in thedeath and destruction of the Second World War.

7 The 1947 GATT created anew basic template of rules and exceptions to regulate international tradebetween members (referred to as contracting parties) and locked in initial tariffthe wto and gatt111. The twenty-three countries engaging in the Geneva negotiations that led to the signing ofthe GATT in 1947 were Australia, Belgium, Brazil, Burma (Myanmar), Canada, Ceylon (SriLanka), Chile, China, Cuba, Czechoslovakia (Czech Republic and Slovakia), France, India,Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, South Africa, SouthernRhodesia (Zimbabwe), Syria, United Kingdom, and United States.

8 For a discussion of the negoti-ating History leading up to the GATT, see Irwin, Mavroidis, and Sykes (2008). 01-0323-5 9/17/09 9:58 AM Page 11reductions that these countries committed to establish. Even as early as 1952,the tariff cuts had reduced average tariffs substantially, as shown in table 1-1, fora number of these the next forty-seven years, more countries signed on to the GATT, andfurther trade liberalization negotiations table 1-2 documents, between1947 and 1994, the GATT contracting parties began and concluded eight sepa-rate negotiating rounds of voluntary trade liberalization.

9 The last of these com-pleted rounds was the Uruguay Round, which ended the GATT era in 1994 byushering in the World Trade Organization. By 1994, the GATT membership hadsimultaneously expanded from an initial 23 contracting parties to 128 participat-ing countries. With a number of new members acceding to the WTO since its1995 inception, more than 150 countries have signed the Negotiating Rounds and Negotiating ApproachesThe first five rounds of GATT negotiations covering the initial 1947 61 periodwere typically dominated by major exporting countries, or those with a princi-pal supplying interest in a particular product.

10 Getting together and negotiatingreciprocal market access initial negotiators under the12the wto and gattTable Tariff Levels for the United States and Major EuropeanCountries : Data for 1913, 1925, 1931, and 1952 are from Irwin (2002, table , p. 153). Data for 2007are from WTO (2008c). = Not available. a. Tariff levels for each European Community member country represent the EC-wide import tariff Barton and others (2006) provide an economic, legal, and political assessment of the traderegime from the GATT through to the For a discussion, see Dam (1970, chapter 5).