GATT 1947 to 1994 and the WTO: objectives, structure and powers

1. GATT 1947: a provisional agreement

The General Agreement on Tariffs and Trade was signed at Geneva on 30 October 1947 by 23 countries, India included, as an interim tariff agreement pending the International Trade Organization. It was brought into force from 1 January 1948 through a Protocol of Provisional Application. When the Havana Charter failed in the United States Congress, GATT remained the only multilateral instrument on trade for 47 years. Legally it was a treaty, not an organisation: its members were “contracting parties”, it had no constitution, and the Protocol allowed each party to keep existing legislation inconsistent with Part II (grandfather rights).

The core obligations of GATT 1947

• Article I: general most-favoured-nation treatment.
• Article II: schedules of concessions (bound tariffs).
• Article III: national treatment on internal taxation and regulation.
• Article VI: anti-dumping and countervailing duties.
• Article XI: general elimination of quantitative restrictions.
• Article XIX: emergency action (safeguards).
• Articles XX and XXI: general and security exceptions.
• Articles XXII and XXIII: consultation and nullification or impairment (dispute settlement).
• Article XXIV: customs unions and free-trade areas.
• Part IV (Articles XXXVI to XXXVIII), added in 1965: trade and development.

2. The eight rounds

• Geneva (1947), Annecy (1949), Torquay (1950–51), Geneva (1956) and the Dillon Round (1960–61): item-by-item tariff bargaining.
• Kennedy Round (1964–67): across-the-board tariff cuts and the first Anti-Dumping Code.
• Tokyo Round (1973–79): the first serious attack on non-tariff barriers, through plurilateral “Codes” on subsidies, technical barriers, import licensing, customs valuation, government procurement and anti-dumping, binding only on those who signed; and the Enabling Clause for developing countries.
• Uruguay Round (1986–94), launched at Punta del Este: the most ambitious, covering agriculture, textiles, services, intellectual property, investment measures and dispute settlement, and ending with the Marrakesh Agreement of 15 April 1994.

3. Why GATT needed replacing

• It had no institutional base and only provisional legal status.
• Dispute settlement worked by positive consensus: the losing party could block the establishment of a panel or the adoption of its report.
• The Tokyo Round codes produced “GATT à la carte”, with different members bound by different rules.
• Agriculture and textiles (the Multi-Fibre Arrangement of 1974) were largely outside its discipline, and services, intellectual property and investment were not covered at all.
• Grey-area measures such as voluntary export restraints escaped Article XIX.

4. The role of GATT in establishing the WTO

The WTO did not abolish GATT; it absorbed it. The Uruguay Round was conducted under GATT and its outcome was a single package. GATT 1947, as amended, together with the protocols, decisions and understandings, was carried into the new system as GATT 1994, one of the Multilateral Agreements on Trade in Goods in Annex 1A. Article II:4 of the Marrakesh Agreement says that GATT 1994 is legally distinct from GATT 1947. The WTO adopted GATT's practice of consensus decision-making (Article IX:1) and declared that it shall be guided by the decisions, procedures and customary practices of the contracting parties to GATT 1947 (Article XVI:1). The GATT Secretariat became the WTO Secretariat. GATT is therefore both the ancestor of the WTO and, in its 1994 form, the central agreement the WTO administers.

5. The WTO: objectives

The Preamble of the Marrakesh Agreement sets them out: raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding production of and trade in goods and services, while allowing optimal use of the world's resources in accordance with sustainable development and with positive efforts to ensure that developing countries, especially the least developed, secure a share in trade growth. The means are reciprocal and mutually advantageous arrangements to reduce tariffs and other barriers and eliminate discriminatory treatment, and an integrated, more viable and durable multilateral trading system.

6. Scope and functions

Article II:1: the WTO provides the common institutional framework for the conduct of trade relations among its members. Article II:2 makes the agreements in Annexes 1, 2 and 3 binding on all members (the single undertaking); Article II:3 makes the plurilateral agreements in Annex 4 binding only on those who accept them. Article III lists five functions: administering the agreements, providing a forum for negotiations, administering the Dispute Settlement Understanding, administering the Trade Policy Review Mechanism, and co-operating with the IMF and the World Bank.

7. Structure (Articles IV and VI)

• Ministerial Conference: all members, at least once every two years; may take decisions on all matters under any multilateral agreement.
• General Council: all members; acts between sessions and also convenes as the Dispute Settlement Body and the Trade Policy Review Body.
• Councils for Trade in Goods, for Trade in Services, and for TRIPS, working under the General Council.
• Committees on Trade and Development, on Balance-of-Payments Restrictions, and on Budget, Finance and Administration, and others set up later (Trade and Environment).
• Secretariat headed by a Director-General appointed by the Ministerial Conference. Article VI:4 requires the Director-General and staff to be exclusively international in character.

8. Powers of the WTO

• Legal personality: Article VIII gives the WTO legal personality and the privileges and immunities necessary for its functions.
• Decision-making (Article IX): consensus; failing it, a majority of votes cast, one member one vote, the European Union voting with as many votes as its member States.
• Authoritative interpretation (Article IX:2): exclusively by the Ministerial Conference and the General Council, by a three-fourths majority of members.
• Waivers (Article IX:3): in exceptional circumstances, by three-fourths of members, subject to annual review. The TRIPS waiver on compulsory licences for export of medicines (2003) began this way before becoming Article 31bis.
• Amendment (Article X): some provisions only by acceptance of all members (Article IX, GATT Articles I and II, GATS Article II:1, TRIPS Article 4); others by two-thirds, binding only those who accept, unless the Conference decides otherwise.
• Accession (Article XII): on terms agreed with the WTO, approved by a two-thirds majority of the Ministerial Conference.
• Binding dispute settlement under the DSU, with authorised retaliation.
• Conformity of laws (Article XVI:4): each member must ensure the conformity of its laws, regulations and administrative procedures with its obligations. No reservations may be made to the Agreement (Article XVI:5).
• Withdrawal (Article XV): on six months' written notice.

How this is examined

For “role of GATT in establishing WTO”, write sections 1 to 4: what GATT was, what the rounds achieved, why it was inadequate, and how the Uruguay Round carried it into the WTO as GATT 1994. For “objectives and structure” or “structure, objectives and scope”, write sections 5 to 8 and close with one paragraph on India as a founding member. For a short note on the structure, a numbered list of the organs with one line on each, plus Article IX decision-making, is enough for six marks.