GATT | Objectives & Principles

The World Bank recommended the establishment of an International Trade Organization (ITO). Instead of ITO, General Agreement on Tariff and Trade (GATT) was formed in 1948.

Objectives of GATT

The General Agreement on Tariff and Trade was a multilateral treaty that laid down rules for conducting international trade. The preamble to the GATT can be linked to its objectives.

1. To raise the standard of living of the people,

2. To ensure full employment and a large and steadily growing volume of real income and effective demand.

3. To tap the use of the resources of the world fully.

4. To expand overall production capacity and international trade.

Principles of GATT

For the realization of the above mentioned objectives, GATT adopted the following principles.

  1. Non Discrimination,
  2. Protection through tariffs,
  3. A stable basis of trade, and;
  4. Consultation

1. Non Discrimination

The international trade should be conducted on the basis of nondiscrimination. No member country shall discriminate between the members of GATT in the conduct of international trade. On this basis, the principle “Most favored Nation” (MFN) was enunciated. This means that “each nation shall be treated as good as the most favored nation”. All contracting parties should regard others as most favorable while applying and administering import and export duties and charges. As far as quantitative restrictions are concerned, they should be administered without favor.

Exceptions to the principle of non-discrimination: However, certain exceptions to this basic rule are to be allowed. There is no objection to form free trade areas or custom unions. Such integration should facilitate consistent trade between the constituent territories. They should not raise barriers to the trade of other parties. GATT allows its members to follow measures to counter dumping and export subsidies. However, such measures should be applied only to offending countries.

2. Protection through tariffs only

GATT rules prohibit quantitative restrictions. Domestic industries should be protected only through customs tariffs. Restrictions on trade should be limited to the less rigid tariffs.

Exceptions: exceptions to this principle is given to the countries which suffer from unfavorable balance of payments position. Developing countries also enjoy this exception. Import restrictions may be applied to agricultural and fishery products if their domestic production is subject to equally restrictive production.

3. A stable basis of trade

GATT seeks to provide a stable and predictable basis for trade. It binds the tariff levels negotiated among the contracting countries. Binding of tariffs prevents the unilateral increase in tariffs, But still there is a provision for renegotiation of bound tariffs. A return to higher tariffs is discouraged by the requirement that any increase is to be compensated for.

4. Consultation

The member countries should consult one another on trade matters and problems. The members who feel aggrieved that their rights under GATT are withheld can call for a fair settlement. Panels of independent experts have been formed under the GATT council. Panel members are drawn from countries which have no direct interest in the disputes under investigation. They look into the trade disputes among members. The panel procedure aims at mutually satisfactory settlement among members.

One Response

Leave a Reply

This site uses Akismet to reduce spam. .




Recent Posts


Related pages


preferential issuedisadvantages of bill of exchangedefinition of nominal wagesimportance of elasticity of demand and supplyfunctions of primary market and secondary marketdefine reengineeringsocial audit advantages disadvantagesvoid vs voidable contractwhat are the advantages of autocratic leadershipfranchisee definitionseniority meaning in hindidefinition of wagerdisadvantages of budgetingtrade payable turnover ratiostrengths and weaknesses of purposive samplingadvantages and disadvantages of public corporationmixed economy disadvantagesdifference between hire purchase and installmentcaveat emptor buyer bewareactivity based costing methodwhat does urbanisation meanaudit tickmarksfactoring calcuinductive method meaningrole of merchant bankerrandom samplerdebtor ledgerpros and cons of market segmentationtechniques of scientific management by taylornon probability convenience sampling methodqualities of successful salesmanwhat are the characteristics of a capitalist economydisadvantages of retained profitsformula of stock turnover ratioidbi wikipediaadvantages of cellular layoutsales manager duties and responsibilitiesdisadvantages of process layoutsocialization in childhoodadvantages of waterwaysratio analysis interpretationsocialist economic system definitionrandom and nonrandom sampling methodsrbi activitiesmanagerial accounting and decision makingskimming pricing strategycima costsprobability sampling meaningpetty cash withdrawal formdisadvantages of financial statement analysisdefinition of sole traderhow to start a chit fund company in indiaimportance of export financecalculate accounts payable turnoverdefinition of labour turnoveraccounts recievable turnover rationationalisation of banks in indiawho is a drawer of a chequefactors influencing foreign direct investmentpay back calculationdefinition of privitysole proprietorship economics definitionturnover accounting formulaadvantages and disadvantages of systematic sampling methodadvantages of control accountsdefine conglomerate mergerlegal aspects of factoringcentralized and decentralized organizationsfeatures of autocratic leadershipconvertible preference sharesmbo managementinterpretation of common size balance sheetnational security depository limitedbudgetorywagering meansnegative aspects of capitalismmeaning of business process reengineering