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GATT Rounds - Emergence of World Trade Organisation WTO

The Second World War ended in Europe in May 1945. After its end, some countries in the world soon realised the importance and need of international trade. Later, after a period of two years, these countries finally came together and started discussing important plans with an intension to promote global trade. As a result, the General Agreement On Tariff and Trade (i.e GATT) was first signed by 23 countries, in April 1947, at Geneva, Switzerland.

India was one of the founding members of GATT. In 1994, the membership of GATT rose to 118 countries. In 1995, its membership rose even further, and 123 countries were in the GATT list. By December 2010, the total membership of WTO reached its peak value of 153.

gatt rounds emergence of world trade organisation wto

The primary objective of the GATT was to promote world trade through co-operation of its member countries. GATT provided for reduction of high tariff rates and even eased out numerous trade restrictions. GATT's plan was to promote global trade in a gradual fashion or step-by-step manner over a period of time. This was supposed to be accomplished through different rounds of trade negotiations to be held from time to time. So far, eight rounds have been held. The guiding principle of GATT was the MFN (Most Favoured Nation) clause. The purpose of this clause was to discourage Bilateralism and encourage Multilateralism for the expansion of world trade. In the various rounds of trade negotiations, member nations agreed on tariff reduction over a large number of traded goods.

The most significant round of trade negotiation began in Punta del Este, Uruguay in September 1986. Uruguay's round, the eighth round of Multilateral Trade Negotiations (MTN) was conducted within the framework of GATT. Uruguay Round spanned from 1986 to 1994 and took more than eight years of complex negotiations to complete.

Differences existed among member nations on various issues like agriculture subsidies, multi-fiber agreement, trade in services, anti-dumping, intellectual property rights, etc. These differences resulted in a sharp division of opinions between the developed and developing nations. Due to the existence of these differences, the Director-General of GATT, Arthur Dunkel prepared a Draft of Final Act, which was known as Dunkel Draft. The Dunkel Draft was intensely discussed and debated and was initially opposed by developing nations, labour unions and other right groups. Eventually, after a lot of intense discussion, the Final Act was signed by all member nations on April 1994. With the signing of the Final Act, the World Trade Organisation (WTO) was born and set up.

The WTO Agreement came into force on 1st January, 1995. India became a founder member of WTO by ratifying (i.e by approving and giving formal sanction to) WTO Agreement on 30th December, 1994.

So, GATT was not an organisation at all, else, it was only a legal arrangement that paved the way for the establishment of WTO.

WTO is a new international organisation set up as a permanent body. It is designed to play an important role in various spheres like trade in goods and services, foreign investment, intellectual property rights, anti-dumping laws, etc. Its main objective is to promote free and fair trade.

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