General Agreement on Tariffs and Trade

GENERAL AGREEMENT ON TARIFFS AND

TRADE

• The General Agreement on Tariffs and Trade (GATT) was first signed in 1947.

• GATT was designed to provide an international forum, that encouraged free trade between member states by regulating and reducing tariffs on traded goods providing a common mechanism for resolving trade disputes.

GATT ???

A Treaty, not an Organization

GATT was the outcome of the failure of negotiating governments to create the ITO

The Bretton Woods Conference introduced the idea for an organization to regulate trade as part of a larger plan for economic recovery after World War II

As governments negotiated the ITO, 15 negotiating states began parallel negotiations for the GATT as a way to attain early tariff reductions

Once the ITO failed in 1950, only the GATT agreement was left.

The GATT's main objective was the “Reduction of Barriers to International Trade”

This was achieved through the Reduction of Tariff barriers Quantitative Restrictions Subsidies on trade through a series of

agreements

Objective

3 Phases First Phase , from 1947 until the Torquay

Round A second phase, encompassing three

rounds, from 1959 to 1979

The Third phase, consisting only of the Uruguay Round from 1986 to 1994

History

Commodities which would be covered by the agreement and freezing existing tariff levels

First Phase

Year Place/name Subjects covered

1947 Geneva Tariffs

1949 Annecy Tariffs

1951 Torquay Tariffs

Focused on reducing tariffs

Second Phase

Year Place/name Subjects covered

1960-1961 GenevaDillon Round

Tariffs

1964-1967 GenevaKennedy Round

Tariffs and anti-dumping measures

1973-1979 GenevaTokyo Round

Tariffs, non-tariff measures, “framework”agreements

Extended the agreement fully to new areas such as intellectual property, services, capital, and agriculture. Out of this round the WTO was born.

Third Phase

Year Place/name Subjects covered

1986-1994 GenevaUruguay Round

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc

NAME START

DURATION

COUNTRIES SUB. COVERED

ACHIVEMENTS

1.GENEVA APRIL

1947

7 MONTHS 23 TARIFFS SIGNING OF GATT,

45,000 TARIFF

CONCESSIONS

AFFECTING $10

BILLION OF TRADE.

2. ANNECY

APRIL

1949

5

MONTHS

13 TARIFFS COUNTRIES

EXCHANGED SOME

5000 TARIFF

CONCESSIONS.

ROUNDS

NAME START DURATION

COUNTRIES

SUB. COVERED

ACHEVEMENTS

3.

TORQUAY

SEPT.

1950

8 MONTHS 38 TARIFFS COUNTRIES

EXCHANGED SOME

8700 TARIFF

CONCESSIONS,

CUTTING THE

TARIFFS BY 25%

4.

GENEVA

II

JAN. 1956 5 MONTHS 26 TARIFFS,

ADMISSION

OF JAPAN

$2.5 BILLION IN

TARIFF

REDUCTION

5.

DILLON

SEPT.

1960

11 MONTHS 26 TARIFFS TARIFF

CONCESSION

WORTH $4.9

BILLION OF

WORLD TRADE.

NAME START DURATION

COUNTRIES

SUB. COVERED

ACHIVEMENTS

6.

KENNED

Y

MAY

1964

37 MONTHS 62 TARIFFS &

ANTIDUMPING

TARIFF CONCESSION

WORTH $40 BILLION

OF WORLD TRADE

7.

TOKYO

SEPT.

1973

74 MONTHS 102 TARIFF, NON

TARIFF

MEASURES,

“FRAMEWORK

”

AGREEMENTS

TARIFF REDUCTION

WORTH $190 BILLION

ACHIEVED.

8.

URUGUA

Y

SEPT.

1986

87 MONTHS 123 TARIFFS,NON

TARIFFS,RULE

S,

SERVICES,IP,D

ISPUTE

SETTLEMENT,

TEXTILES,AGR

I.

CREATION OF WTO, &

EXTENDED THE RANGE OF

TRADE

NEGOTIATION,LEADING TO

THE REDUCTION IN

TARIFFS(ABOUT 40%).

Did GATT succeed?

Continual reductions in tariffs helped spur very high rates of world trade growth during the 1950s and 1960s — around 8% a year on average

Trade growth consistently out-paced production growth

The rush of new members during the Uruguay Round demonstrated recognition of multilateral trading system as the anchor for development and an instrument of economic and trade reform.

Impact Of GATT

GATT’s success in reducing tariffs to a low level, with a series of economic recessions 1970-80’s drove governments to devise other forms of protection for sectors facing increased foreign competition

High rates of unemployment and constant factory closures led governments in Western Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade.

Both these changes undermined GATT’s credibility and effectiveness.

The problem was not just a deteriorating trade policy environment.

By the early 1980s the General Agreement was clearly no longer as relevant to the realities of world trade as it had been in the 1940s

World trade had become far more complex and important than 40 years before

The globalization of the world economy was underway

Trade in services — not covered by GATT rules

Ever increasing international investments

Factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted.

That effort resulted in the Uruguay Round, the Marrakesh Declaration, and the

creation of the WTO.

Whereas GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The WTO expanded its scope from traded goods to trade within the service sector and intellectual property rights

The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from all WTO member countries.

Why was IP Included In GATT?

Reasons for Including IP on the GATT Agenda:• Growth in world trading.• Increased importance of global IP protection.• Existing provisions of international law were

perceived insufficient.1. Absence of enforcement of rights

before national judicial authorities.2. Lack of a dispute settlement

mechanism between States. 3. Standards were outdated.

Drug Prices In India After GATT Agreement

Inventions should benefit mankind while giving a degree of advantage to the inventor.

But the central theme of Trade Related Aspects of Intellectual Property Rights (TRIPS) is to ensure that the innovator’s rights are protected, even at the cost of learning millions of the poor to disease and death.

The first and foremost issue is that a real difference comes in only regarding drugs which are under patent in any one of the WTO member countries.

Indian Government has issued a list of nearly 300 essential drugs required in healthcare a high percentage; nearly 90% of these drugs are of patent.

Pharmaceutical companies use a number of strategies to promote the sales of their drugs, especially their patented drugs, because they plan to make money before the patent expires. Ex: Terfenadine

Fexofenadine

A second strategy is to introduce a number of drugs of more or less same nature.

Ex : The first drug of a class of drugs called ACE inhibitors introduced was Captopril; which was followed by Enalapril. Now we have Lisinopril, Ramipril, Perindopril, Quinapril, Cilazapril, Benazepril, Fosinopril etc.

Now 85% of the Indian drug market is generic and 15% is covered by patents.

Patented drugs may be costly.

Regarding the prices of drugs which are not under patent, we should mention that Indian drugs are the cheapest in the world.

On average, drugs manufactured in India are between 1000 and 4000 percent cheaper than the same products produced in USA.

One reason why generics are so cheap in India is that in India manufacture of drugs is very cheap. India is placed fourth in terms of volume of generic market just after the US, Japan and Germany.

Indian Pharma companies have the advantage of very low cost of production of drugs.

Indian companies incur 0.05% of cost of production compared to developed countries. This impossible fact is being seen in India because of very less expensive manpower and low overheads.

Indian drug prices are well controlled by the Drug Price Control Orders.

NPPA, the National Pharmaceutical Pricing Authority was started in August 1997 to keep a proper control over drug price rise .

GATT has been replaced by WTO.

Even though the functions of GATT had been taken over by the WTO, it works on the frame work of GATT.

WTO is the working institutional body.