Glossary term
General Agreement on Tariffs and Trade (GATT)
GATT was the postwar multilateral trade agreement that reduced tariffs and created rules for trade in goods before the WTO.
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What Was the General Agreement on Tariffs and Trade (GATT)?
The General Agreement on Tariffs and Trade, or GATT, was a multilateral trade agreement signed after World War II to reduce tariffs and establish rules for international trade in goods. It became the main framework for global trade negotiations before the creation of the World Trade Organization.
GATT began in 1947 and shaped decades of tariff reductions, trade rounds, and rules-based trade. The WTO, launched in 1995, incorporated and expanded the multilateral trading system, but GATT remains part of WTO law for trade in goods.
Key Takeaways
- GATT was a postwar agreement focused on trade in goods.
- It aimed to reduce tariffs and limit discriminatory trade barriers.
- It supported multiple rounds of trade negotiations.
- The Uruguay Round led to the creation of the WTO.
- GATT principles still influence modern trade rules.
How GATT Worked
GATT created rules and negotiating forums for participating countries. Members negotiated tariff concessions, applied most-favored-nation principles, and used the agreement to manage trade disputes and reduce barriers over time.
The agreement was not a full international organization in the modern WTO sense. It functioned as a treaty and institutional framework that gradually expanded through negotiating rounds.
The Uruguay Round, completed in the 1990s, was especially important. It led to the WTO and agreements covering goods, services, intellectual property, dispute settlement, and a broader institutional structure.
GATT Timeline
Period | Development | Why it matters |
|---|---|---|
1947 | GATT signed | Postwar trade rules begin |
1948 onward | GATT applied provisionally | Framework for tariff reductions |
1986-1994 | Uruguay Round | Broad trade negotiations |
1995 | WTO begins | Modern trade institution created |
Limits and Misunderstandings
GATT was not the same as free trade without rules. It allowed exceptions, safeguards, negotiated schedules, and legal disciplines. Countries still used trade policy within the agreement's framework.
It also was not the same as the WTO. The WTO is the institutional organization created later, while GATT is both the historical agreement and a continuing legal agreement for goods within the WTO system.
For businesses, GATT matters because modern trade rules, tariff schedules, dispute systems, and trade agreements developed from that foundation.
Core GATT ideas such as nondiscrimination and negotiated tariff commitments still matter because they influence how countries structure trade concessions and disputes today.
The Bottom Line
GATT was the foundation of the postwar rules-based trading system for goods. It reduced tariffs, shaped trade negotiations, and became a core building block of the WTO framework that followed.