Petros C. Mavroidis, ‘The Genesis of the GATT Summary’ in Henrik Horn and Petros C. Mavroidis (eds), Legal and Economic Principles of World Trade Law (Cambridge University Press, 2013) pp.1-8.
Background
Petros C. Mavroidis is professor of European Union and World Trade Organization (WTO) Law at the University of Neuchâtel and at Columbia Law School, New York and now at the European University Institute in Florence. He came to Switzerland working for the GATT. He maintains close ties with the Secretariat of the WTO and was a founding member of the World Trade Institute. He originally focused his work on antitrust and public international law, with international trade encompassing both areas. His main contribution consists of elaborating and pioneering the linkages of law and economics in the field of international trade regulation.
The creation of the General Agreement on Tariffs and Trade (GATT), the forerunner to the World Trade Organization came at a time of international turmoil. Two world wars with a great recession in-between had torn apart the economic system, with moderate tariffs and expanding world trade, that had been producing worldwide economic prosperity prior to World War I.
Summary
The text is a summary of a work carried out by Douglas A. Irwin, Petros C. Mavroidis and Alan O. Sykes, The Genesis of the GATT, Cambridge University Press, New York City, 2008 which looked to investigate some of the objectives pursued by those involved in the establishment of the GATT.
The negotiations to establish the GATT took part among a number of like-minded countries, led by the United States and United Kingdom between 1946 and 1947. The negotiations were set against a background of international turmoil. World War I had disrupted a period of increasing worldwide economic prosperity with moderate tariffs and expanding world trade supported by a well-functioning international monetary system (the gold standard). Following the war the system recovered slowly and the great recession of 1929 originating in the United States sparked a global economic downturn which saw countries adopting ‘beggar-thy-neighbour’ policies in an attempt to insulate their own economy by raising trade barriers. This only led to the collapse of international trade and a deepening of the recession.
The negotiations themselves were dominated by the UK and the U.S. who had drafted the Suggested Charter negotiations on the GATT. They were convened from 1946-1947 and took place in London, Lake Success and Geneva. The result in Geneva was hundreds of tariff concessions supported by commitments not to discriminate when recourse to domestic instruments was being made had left the station of protectionism.
The GATT was supposed to be a temporary measure to be replaced by the International Trade Organisation, however it continued for fifty years and was the de facto institution in order to fill the void left by the non-advent of the ITO. Developing countries had prioritized their efforts on the ITO meaning that when it failed meant their negotiating efforts were in vain. In accepting GATT nations committed to a trade-liberalization model that would only allow protection of domestic producers through tariffs, making quantitative restrictions illegal and ensuring that domestic instruments should not operate to afford protection. Trading nations further accepted that tariffs would be negotiated down in successive rounds of trade liberalization. All tariff advantages would be extended to all trading partners signed up to the GATT. The UK secured that imperial preferences were allowed to remain in place during a transitional phase in exchange to an extension of Most Favoured Nation. Non-discrimination was further tempered by accepting an explicit provision on preferential trade agreements: proliferated in the first post-World War II years and at a much faster pace later on.
GATT is limited to regulating state behaviour only without touching upon trade impediments that are attributed to private behaviour. Basic bargain of the GATT: the tariff bargain. Not just this provision but to similar measures that could have comparable effects. Antidumping, balance of payments, safeguards, institutional provisions, etc.
Finally, Mavroidis speculates what the GATT framers had in mind by looking at two economic theories that seek to explain why trade agreements occur. He rejects the commitment theory, that focuses on the relationship between a government and its private sector, although he sees some merits in the terms-of-trade-treaty Mavroidis ultimately concludes that the extension of MFN to all participants underscores the idea that Cordell Hull’s initial aspiration to world peace ultimately carried the day.