The Relationship between GATT and WTO and their Impact on Globalization

The Relationship between GATT and WTO and their Impact on Globalization

The General Agreement on Tariffs and Trade (GATT) was an agreement between countries where governments were the contracting parties. GATT was intended to set the regulations that would govern international trade. Non-discriminatory principles such as Most Favoured Nation (MFN) and National Treatment were implemented. GATT effectively reduced trade barriers and other tariffs (Cimino-Isaacs & Fefer, 2021). Tariff reduction was featured mainly in most negotiation rounds GATT went through. The other objectives that were part of GATT’s negotiation rounds included market access, dispute settlement, transparency, development, agriculture, unfair trade practices, reduction or elimination of barriers that limit trade of services, intellectual property, foreign direct investment, and promotion of respect for workers’ rights (WTO, n.d).

The World Trade Organisation (WTO) is different from GATT. Its main functions include establishing new regulations through negotiations, resolving disputes among member states, and administering rules and disciplines of the trading system. WTO’s primary objective is “to ensure that trade flows as smoothly, predictably, and freely as possible” (Cimino-Isaacs & Fefer, 2021). Both WTO and GATT have ensured that member states can trade freely. Free trade is governed by rules and disciplines that eliminate discriminative elements, reduce tariffs, and eliminate trade barriers. Such trade activities have influenced globalization positively as more countries interact with each other in trade transactions.

Furthermore, the reduced barriers have significantly opened up these interactions, leading to more international trade. Through WTO, establishing trust between member states increases the stability of trade activities around the globe. In globalization, innovation, growth, and competition also increase. Finally, the competition fostered by the different principles that WTO and GATT create should be undistorted and supportive of the trade activities in a beneficial way (Cimino-Isaacs & Fefer, 2021).

References

Cimino-Isaacs, C. D., & Fefer, R. F. (2021). World Trade Organization: Overview and Future Direction.

WTO. (n.d). General Agreement on Tariffs and Trade.

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The discussion will explore the roles the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) played in forming international trade standards, including their overall impact on international business. According to Cavusgil, Knight, & Riesenberger (2020), after WWII, the U.S. economy boomed and became the top economy in the world. In your discussion post this week, examine the relationship between GATT and WTO regarding international trade and discuss the impact they, respectively, had on the evolution of globalization.