General Agreement on Tariffs and Trade (GATT) was made in the year 1947, that aimed at initiating an international trade, by liberalizing policies and removing tariffs. It was succeeded by World Trade Organization (WTO), which is a global organization, that encourages and facilitates inter-country trade and also helps in resolving trade disputes.
GATT is a multilateral agreement, between several nations of the world, that regulates international trade. Its primary objective is to reduce tariffs to a substantial amount along with abolishing other trade barriers. But, in the year 1995, WTO replaced GATT. WTO has more powers and augmented functions in dealing with the international economic affairs. Hence, there is a big difference between these two, which is clarified in the article below, take a read.
Content: GATT Vs WTO
Comparison Chart
| Basis for Comparison | GATT | WTO |
|---|---|---|
| Meaning | GATT can be described as a set of rules, multilateral trade agreement, that came into force, to encourage international trade and remove cross-country trade barriers. | WTO is an international organization, that came into existence to oversee and liberalize trade between countries. |
| Institution | It does not have any institutional existence, but have a small secretariat. | It has permanent institution along with a secretariat. |
| Participant nations | Contracting parties | Members |
| Commitments | Provisional | Full and Permanent |
| Application | The rules of GATT are only for trade in goods. | The rules of WTO includes services and aspects of intellectual property along with the goods. |
| Agreement | Its agreement are originally multilateral, but plurilateral agreement are added to it later. | Its agreements are purely multilateral. |
| Domestic Legislation | Allowed to continue | Not allowed to continue |
| Dispute Settlement System | Slow and ineffective | Fast and effective |
About GATT
GATT expands to General Agreement on Tariffs and Trade, is an international trade treaty, that came into existence in the year 1947, just after the second world war, as a result of Bretton Woods Agreement. It is a multilateral legal agreement which was signed by 23 nations. It was enacted to bolster the economic recovery which aimed at expanding world trade, by abolishing those trade barriers, such as reducing tariff, quota, subsidies etc.
There are three main provisions made in this regard, which are:
- When it’s about the tariff, all the member nations are considered as equal.
- Restriction on the number of imports and exports are prohibited but subject to certain exceptions.
- Special provisions are made to encourage trade of developing nations.
Over the years, changes have been made to the agreement. GATT remained till 1994, after which it was replaced by WTO and at that time the total number of contracting parties (member nations) were 123.
About WTO
WTO stands for World Trade Organization, is the sole international body concerned with the provisions of cross-country trade, based in Geneva, Switzerland. Basically, there is an agreement called WTO agreement, which is duly signed and negotiated by member nations of the world and confirmed in their parliaments.
In the real sense, WTO is a place, where the governments of member countries attempt to resolve their trade problems, encountered by them during the trade with other countries. The member governments (who can be ministers or their ambassadors or delegates) operate WTO and all decisions are also taken by consensus.
The organization helps the producer of goods and services deal in just and fair manner, to carry out their business throughout the world. It is aimed at liberalizing trade, for the benefit of all the nations, but it also imposes certain barriers, such as to provide protection to consumers or stop the spreading a disease.
Key Differences Between GATT and WTO
The points given below explain the difference between GATT and WTO in detail:
- GATT refers to an international multilateral treaty, signed by 23 nations to promote international trade and remove cross-country trade barriers. On the contrary, WTO is a global body, which superseded GATT and deals with the rules of international trade between member nations.
- While GATT is a simple agreement, there is no institutional existence, but have a small secretariat. Conversely, WTO is a permanent institution along with a secretariat.
- The participating nations are called as contracting parties in GATT, whereas for WTO, they are called as member nations.
- GATT commitments are provisional in nature, which after 47 years the government can make a choice to treat it as a permanent commitment or not. On the other hand, WTO commitments are permanent, since the very beginning.
- The scope of WTO is wider than that of WTO in the sense that the rules of GATT are applied only when the trade is made in goods. As opposed to, WTO whose rules are applicable to services and aspects of intellectual property along with the goods.
- GATT agreement is primarily multilateral, but plurilateral agreement is added to it later. In contrast, WTO agreements are purely multilateral.
- The domestic legislation is allowed to continue in GATT, while the same is not possible in the case of WTO.
- The dispute settlement system of GATT was slower, less automatic and susceptible to blockages. Unlike WTO, whose dispute settlement system is very effective.
Conclusion
The main purpose of the implementation of GATT was to increase cross-country trade in the world, so as to reinforce economic soundness, after the second world war. It is the foundation of WTO, that made open trade between nations but also maintained some barriers for the benefit of all.
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