Business Law - The General Agreement on Tariffs and Trade and the World Trade Organization

Hey there. Welcome to this lecture on the general agreement on tariffs and trade as well as the world trade organization or WTO. In this lecture, we're going to explore the historical context, purpose, and functions of these international provisions that have significantly shaped global trade. So let's get started.

Now the general agreement on tariffs and trade or GAT was established in 1947 as a multilateral agreement among nations with the intent of promoting international trade and reducing trade barriers. Now this particular provision was done in response to some of the trade disruptions and the economic hardships that were caused by World War II. So the primary goal was to foster economic growth, help to increase standards of living, and help to ensure affair and predictable trade practices. Now this is done through a couple of key provisions.

The first is what we call tariff reduction. So the GAT sought to lower tariffs on goods as well as eliminate discriminatory trade practices such as import quotas and subsidies. In doing so, it aimed to create a more open and level playing field for international trade. The second provision is the most favored nation principle.

Now GAT introduced the most favored nation principle, which states that any favorable trade terms offered to one country have to be extended to all member countries. This principle promotes non-discrimination as well as equal treatment among the trading partners. The next provision is what we call dispute settlement. Now GAT established a mechanism for trying to resolve trade disputes between member countries.

Disputes essentially would be addressed through negotiations and if necessary through a formal dispute settlement process. This helped to prevent trade conflicts and helped to maintain some stability with regards to the global trade system. Over time, GAT underwent significant developments leading to the creation of what we call the World Trade Organization or WTO in 1995. So we're going to explore first why this transformation took place and really what the role of the WTO is today.

Now the evolution of the GAT into what we know as the WTO was driven by several factors. So the first is expansion of GAT coverage. GAT initially focused on trade in goods but did not adequately address emerging issues like services, intellectual property rights as well as investment. Now the WTO was formed to broaden the scope of international trade rules to cover these areas that were left out under GAT.

Next is the strengthening of the institutional framework. Now the WTO was created to provide a more robust and permanent institutional structure for the governments of international trade. It aimed to enhance transparency, increase the efficiency of dispute resolution and improve monitoring as well as enforcement mechanisms. One of the criticisms of the general agreement on tariffs and trade is it didn't have necessarily a way to encourage and make sure that countries were engaging in fair trade practices.

The WTO was created in order to help remedy this. Now that we understand the why behind the GAT transforming into the WTO, let's explore the purpose as well as the functions of the WTO. Now the World Trade Organization serves as the global organization overseeing international trade. It builds on the foundations of GAT and extends its functions into several areas.

The first is trade negotiations. The WTO helps to facilitate trade negotiations among member countries to further liberalize trade, reduce barriers and create new trade agreements. This includes negotiations on tariffs, services, intellectual property as well as agriculture. The WTO maintains a robust dispute settlement process which ensures that member countries can resolve trade conflicts based on established rules and procedures.

This provides a fair and impartial form for addressing trade disputes. And lastly, the WTO addresses the area of monitoring and surveillance. So the WTO monitors trade policies and practices of member countries to help ensure compliance with agreed upon rules. It conducts a regular review of members trade policies, provides technical assistance and helps to encourage transparency in all trade related matters.

Now as we wrap up this video, I just want to convey that both the general agreement on tariffs and trade and the WTO have really played significant roles in shaping global trade. GAT aimed to reduce those trade barriers and help to promote economic growth while the WTO built upon those foundations to help encompass a broader range of trade issues and provide an institutional framework for trade governance. Through their provisions, these international agreements have fostered a more open, predictable as well as rules-based trading system. They've both contributed to economic development, facilitated cooperation among nations, as well as provide mechanisms for resolving trade disputes.

Both of these provisions continue to guide and influence global trade today, fostering economic prosperity and promoting cooperation among nations. I hope you've enjoyed this lecture. Thanks for watching and we'll see you next time.