General Agreement on Tariffs and Trade (GATT)
The General Agreement on Tariffs and Trade (GATT) is an international treaty that regulates global trade in goods and aims to liberalize world trade by reducing tariffs and other trade barriers. The agreement was developed after the Second World War as part of the Bretton Woods system and forms the historical foundation for today’s World Trade Organization (WTO). The legal nature of the GATT and its operation are extremely complex and continue to significantly influence international economic law to this day.
Historical development and scope of application
Origins and background
The GATT was negotiated in Geneva by 23 countries in October 1947 and provisionally entered into force on January 1, 1948. Originally, the GATT was intended to be part of an International Trade Organization (ITO), but the ITO was never established. As a result, the GATT functioned for decades as the de facto central framework for international trade in goods.
Contracting parties and scope
The number of members steadily increased; with the founding of the WTO in 1995, the contractual rules of the GATT covered about 128 countries. The GATT primarily regulates trade in goods (“goods”). Services and intellectual property were later addressed by separate agreements (GATS, TRIPS) within the framework of the WTO.
Legal structure and regulatory mechanisms
Structure of the Agreement
The GATT consists of several parts:
- Preamble
- Part I: Core principles such as the most-favored-nation principle and national treatment
- Part II: Commitments to tariff reduction, elimination of quantitative trade restrictions
- Part III: Special provisions for particular situations and exceptions
- Part IV: Special provisions for developing countries
In addition, over the years, the GATT was further developed through so-called “protocols”, “agreements”, and “amendments”, as well as numerous exemptions (“waivers”).
Core legal principles
Most-favored-nation principle (Art. I GATT)
According to the most-favored-nation principle, each contracting state must automatically grant all trade advantages that it gives to one contracting partner to all other contracting parties. This principle ensures non-discrimination in world trade.
National treatment (Art. III GATT)
National treatment obligates contracting states not to treat imported goods less favorably than domestic products. This prevents imported goods from being disadvantaged after crossing the border.
Tariff reduction and tariff binding (Art. II GATT)
States undertake to keep tariffs at a contractually agreed maximum level (so-called “bound tariffs”) or to gradually reduce them. This leads to greater predictability of trading conditions.
Further key provisions
Prohibition of quantitative restrictions (Art. XI GATT)
The GATT prohibits quantitative restrictions on trade (such as import quotas), with few exceptions, in order to ensure the freest possible movement of goods.
Exceptions to the GATT principle
The agreement provides for numerous exemptions (including Art. XX GATT: general exceptions, e.g. for the protection of public morals, health, or natural resources). In addition, there are security exceptions (Art. XXI GATT) as well as rules for trade agreements within regional economic integration (Art. XXIV GATT).
Special provisions for developing countries
Part IV and various special decisions (such as the 1979 Enabling Clause) allow development-dependent special provisions to address the needs of developing countries.
Institutional and procedural aspects
Dispute settlement under the GATT
The GATT established procedures for dispute settlement between contracting states as early as the 1950s. The original mechanisms included consultations, panel proceedings, and decisions of the GATT contracting parties. From the 1980s, this system was successively improved and was eventually replaced by the much more binding dispute settlement mechanism of the WTO.
Monitoring compliance
The contracting parties met regularly to monitor and further develop trade rules (GATT contracting parties conferences; so-called sessions). Here, new commitments could also be adopted or modifications introduced.
GATT and the law of the World Trade Organization (WTO)
With the establishment of the WTO in 1995, the GATT in its revised version (“GATT 1994”) became part of the organization’s core legal system. “GATT 1994” builds on the original 1947 GATT text, supplemented by protocols, notes, and further agreements. It now serves as the basic agreement for trade in goods within the framework of the WTO. When the WTO panel and Appellate Body address disputes, they primarily rely on the GATT’s rules.
Significance and effect in international economic law
The GATT has contributed significantly to the liberalization and predictability of world trade. It establishes legally binding obligations at the international level, which must be observed by the contracting parties. Its principles—in particular, equal treatment, prohibition of discrimination, and legal certainty in customs policy—continue to shape the framework of international trade law to this day.
Literature and references
For further information, legal handbooks on international economic law, especially on the development of world trade law, are recommended. The texts of the GATT, as well as further protocols, are available on the WTO website.
Note: This article provides a comprehensive legal overview of the GATT and its functions and is intended for use in a legal encyclopedia.
Frequently asked questions
What is the legal significance of the GATT in international economic law?
The GATT (General Agreement on Tariffs and Trade) is a multilateral international treaty originally concluded in 1947 with the goal of reducing trade barriers such as tariffs and import restrictions between contracting states and creating an orderly international trading system. Legally considered, the GATT forms a central pillar of international economic law, especially since its integration into the set of agreements of the World Trade Organization (WTO) in 1995. The GATT agreement is legally binding for contracting parties and creates specific rights and obligations, which can be enforced in case of dispute within the WTO dispute settlement system. It covers, among other things, the most-favored-nation principle, the national treatment principle, and the conditions for permissible trade restrictions; violations can be negotiated and sanctioned under detailed procedures. Although its legal effect is formally considered “soft law”, this is reinforced in practice by recognition under domestic law in many member states and implementation by international institutions.
What exceptions to the GATT obligation to reduce tariffs exist?
The GATT contains in several articles specific exceptions which enable member states to depart from the general obligation of non-discrimination and tariff reduction. The most important include exceptions for reasons of security policy (Art. XXI GATT), protection of public morals and health (Art. XX GATT), and protection of domestic industries in the event of serious injury due to increased imports (Art. XIX GATT, the so-called “safeguard clause”). Further exceptions relate to the creation of customs unions and free trade areas (Art. XXIV GATT) as well as measures to protect balance of payments interests (Art. XII and XVIII B GATT). Each exception is specifically regulated and requires proportionality review as well as the use of special consultation mechanisms under GATT/WTO procedures.
How are disputes concerning GATT provisions resolved?
The GATT provides for a dispute settlement procedure, now institutionalized under the WTO, which is embedded in the WTO’s Dispute Settlement Understanding (DSU). Member states can initiate a formal process in case of a suspected breach of GATT provisions, which initially involves consultations (good offices) and then the establishment of a panel to determine any violation. The panel’s report may be accepted by the parties or further pursued in the appeals process. If a violation is found, the respondent state is usually given a reasonable period to comply; otherwise, compensatory measures may be taken. The procedure is internationally binding and is regarded as a model of efficiency and effectiveness in international trade law.
How do GATT provisions relate to regional trade agreements?
Although the GATT prescribes the most-favored-nation principle (Art. I GATT)—that is, equal treatment of all contracting parties—its provisions expressly allow for regional trade arrangements such as free trade areas and customs unions (Art. XXIV GATT). However, such agreements must not disadvantage other GATT members and must meet certain criteria, such as a substantial reduction of tariffs between the countries involved and not increasing trade barriers against third countries. The so-called “Enabling Clause” (decision of 1979) further provides exceptions for trade preferences among developing countries. The compatibility of regional agreements with GATT provisions is regularly reviewed by the WTO Committee on Regional Trade Agreements.
What legal mechanisms exist for enforcing GATT provisions at the national level?
The enforcement of GATT obligations is initially intergovernmental; the agreement thus operates primarily between contracting states. Nevertheless, many member countries implement GATT rules through national legislation, which can make the GATT status justiciable before national courts. In the event of a conflict between domestic law and GATT obligations, the states are internationally required to seek GATT-compliant solutions, often by amending domestic law. However, compliance monitoring is primarily conducted via the WTO dispute settlement process. At the level of Union law, e.g. within the European Union, the GATT is consistently integrated through secondary legislation.
How is the compatibility of trade defense measures (e.g. anti-dumping duties) with GATT law assessed?
Trade defense measures such as anti-dumping duties or countervailing duties are only permitted under the GATT under strict conditions. The agreement refers to supplementary WTO agreements (in particular the Anti-Dumping Agreement and the Subsidies and Countervailing Measures Agreement), which specify the material and procedural requirements for such measures. Central to this is proof of dumping damage and conducting transparent investigation procedures. The GATT itself explicitly provides for the possibility of such protective measures in Art. VI, where they serve the competitive conditions of the domestic market and comply with the other GATT principles, in particular non-discrimination and proportionality. The application is regularly reviewed within the WTO framework and is the subject of numerous dispute proceedings.
