Question

What are two or three of the primary ways in which GATT has expanded international trade?

Answer 1

GATT stands for General Agreement on Tariffs and Trade, which came into existence on Oct 30, 1947. Initially, 23 countries were a part of GATT. It was created to further encourage international trade by reducing and eliminating quotas and tariffs.

However, it came into effect on Jan 01, 1948. Then, it was further refined and eventually on Jan 01, 1995 it was created to World Trade Organization (WTO). By this time, around 125 nations became a part of it.

Ways through which GATT expanded International trade:

The Great Depression had lowered the international trade by almost 66% all because of harmful trade protectionism policies. So, the primary aim of GATT was to remove the trade protectionism. There were 3 primary provisions of GATT that were used to restore the global economic health.

1. Most Favoured Nation Clause

This is the most important and primary clause of GATT. According to this clause, all the participating nations had to confer the 'Most Favoured Nation Status' to other nations. Thus, all the members were treated equally in case of tariffs. No country could discriminate other country. If any nation does some favour for other nation, then it compulsorily had to do the same for other participating nations as well. Thus, Most Favoured Nation implies equal treatment for all the member countries of GATT.

2. Tariff Negotiations and Reductions

Tariffs are the major hindrances or roadblocks in international trade. GATT also recognizes this and thus encourages tariff negotiations to further reduce tariffs. This, should be done on a mutual or reciprocatory basis between the member nations. Developed nations agreed to reduce tariffs on imports from developing countries. This lead to an increase in demand of products as well.

3. Prohibition of Restrictions on Number of Imports and Exports

GATT prohibited restrictions on number of imports and exports, however there were certain exceptions provided-

a) surplus of agricultural products with government

b) if a country has low foreign exchange reserves, and needs to protect its BOP balance from showing deficit

C) due to national security, countries had a right to reserve trade

Thus, these are 3 major ways through which GATT expands international trade.