General Agreement on Tariffs and Trade (GATT)

Contents:

Overview
Elements
Electronic Resources
Print Resources

Overview

The General Agreement on Tariffs and Trade (GATT) was drawn up by 23 countries in 1948. The Agreement was originally part of a draft charter for an International Trade Organization, the third leg of the Bretton-Woods post-war order, along with the IMF and the World Bank. The "Havana Charter" of the ITO contained not only the GATT, which governed trade, but also wide-ranging rules relating to employment, commodity agreements, restrictive business practices, international investment, and services. While the GATT itself, a large list of negotiated trade concessions and rules of conduct, entered into force in January 1948 (as GATT 1947), the rest of the Havana Charter was never ratified, primarily because of opposition in the U.S. Congress.

For the following 47 years, the ever-expanding group of Contracting Parties to the GATT (128 when the WTO was created) treated it as if it were in fact a permanent commitment, rather than the provisional agreement it really was. The tiny secretariat associated with the Havana Charter continued to act as secretariat to the GATT. Eight "rounds" of negotiation, counting the original, reduced tariffs and struggled to produce rules to govern international trade.

Most of the rounds dealt with tariff reduction only, but as tariffs came down, non-tariff barriers went up. The Kennedy round (1964-1967) came to agreement on anti-dumping. And the Tokyo Round went further, dealing with subsidies and countervailing measures, technical barriers to trade, import licensing procedures, government procurement and other non-tariff areas of concern. These agreements, however, were signed by only a few of GATT's Contracting Parties (mainly OECD members).

The most recent round, the Uruguay Round, was the most comprehensive of any, lasting over seven years and creating a legal institution -- the World Trade Organization (WTO) to replace the provisional GATT. As a body of law, the WTO embodies the GATT 1994 as well as several other non-goods-related Agreements, and has a single dispute settlement mechanism to cover all the various Agreements. Unlike the case with the GATT, all WTO Members automatically commit to all of the Agreements, with only a few minor exceptions. See WTO for a full discussion of the organization. The GATT 1994 Agreements included:

Agriculture Agreement
Agreement on the Application of Sanitary and Phytosanitary Measures
Agreement on Technical Barriers to Trade
Agreement on Subsidies and Countervailing Measures
Anti-Dumping and Safeguard Measures Agreements
Agreement on Trade-Related Investment Measures
Agreement on Textiles and Clothing

The full text (downloadable) of the results of the Uruguay Round is available. These results ammend and clarify further understanding of the text of the GATT; thefull text of which is also available.

Elements of the GATT relevant to Sustainable Development

How does the GATT relate to sustainable development? Members of the WTO have committed themselves to behave in certain ways, circumscribing their freedom to draft certain types of domestic legislation, including environmental legislation.

Two basic principles underlie the GATT rules: most-favoured-nation (MFN), and non-discrimination. The first says that a country cannot restrict or promote imports of certain goods from country A if it does not do so from countries B to Z as well -- all countries' imports must get the same deal. The second says that, once a good has entered the country, it must be treated no differently than "like" goods produced domestically. In practice, these rules also mean that a country cannot discriminate against goods produced in an environmentally damaging way, such as paper made by chlorine bleaching. This is because the GATT interprets "like goods" to be those which are similar at point of import. Chlorine-bleached and non-chlorine-bleached paper are similar at the border, no matter how dissimilar their environmental effects at point of production. The inability to discriminate on the basis of how a good is produced is one of the most fundamental conflicts between the GATT law and sustainable development (See Process and Production Methods in the Researchers' Guide for a more complete discussion).

Some elements of GATT 1994 may promote sustainable development. The Agreement on Textiles and Clothing tries to do away with a long-standing protectionist agreement called the Multifibre Arrangement (MFA) which effectively restricted developed country imports of textiles and clothing from developing countries. To the extent that the MFA reduced employment and incomes in poorer counties, its demise is good for sustainable development. It remains to be seen, however, if the rich countries will indeed honour their ten-year timetable for phasing out the MFA.

Another opportunity for promoting sustainable development via the GATT is in the area of agriculture, where reduced subsidies (currently provided mostly by the U.S. and the E.U.) for agricultural products would allow for increased production in the developing countries, and possibly reduce overall use of chemical pesticides and fertilizers. GATT 1994 made some advances in this area, including finally agreeing on what constitutes a subsidy, but the schedule for subsidy reduction is hardly impressive, and in many cases does not even amount to what probably would have been achieved unilaterally without the GATT negotiations in any case; many OECD countries' subsidy programs are under pressure as a result of purely internal budget difficulties.

There are exceptions to the GATT rules, embodied in Article XX. They allow for countries to discriminate in particular circumstances, including where "necessary to protect human, animal or plant health" (Article XX (b)), and in the case of measures "relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption" (Article XX (g)). These exceptions sound good, but they have been interpreted rather narrowly by past GATT Dispute Panels (see Tuna-Dolphin Case). For one thing, the exhaustible natural resources referred to in XX (g) must be within the country's borders, which precludes measures to protect, for example, high-seas marine life, or the ozone layer. For another thing, the word "necessary" in XX (b) has been interpreted to mean "least trade-restrictive", so that a measure could be found GATT-illegal if a less trade-restricting alternative could be imagined, such as an international environmental agreement, for example.

GATT Resources on the Internet

GATT Secretariat Background Papers on Trade and Environment

IISD Researchers' Guide: Overview of the WTO

World Trade Organization home page.

Shaw, Nevin and Aaron Cosbey. GATT, the WTO and Sustainable Development: Positioning the work program on trade and environment. IISD: Winnipeg, Canada, 1994. 42 pp.

Cosbey, Aaron and Nevin Shaw. Beyond the WTO: Finding appropriate homes for the issues of trade and sustainable development. Prepared for the "Trade and Environment Conference", Pacific Basin Research Center, Kennedy School of Government, Harvard University, April 29 - 30, 1994. 15 pp.

This paper tries to define what is needed, in the context of trade and sustainable development, to achieve sustainable development. It then tries to separate those tasks which are appropriate work for the WTO and those that are not, and speculates as to how the latter might be achieved.

GATT Resources in Print

The two papers by Shaw and Cosbey noted above are available in print from IISD. See also the following:

Esty, Daniel C. Greening the GATT: Trade, Environment and the Future. Institute for International Economics: Washington, D.C., 1994, pp 319.

Charnovitz, Steve. "Exploring the Environmental Exceptions in GATT Article XX", Journal of World Trade Vol. 25, No. 5, October 1991, pp 37-56.

Jackson, John. "World Trade Rules and Environmental Policies: Congruence or Conflict?" Washington and Lee Law Review Vol. 49, pp 1227-1259.

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