Under what circumstances were these organizations founded? GATT was founded after some disastrous economic crises in 1930s. The great depression of the 1930s affected a majority of the world population. The average unemployment rate around the world was about 30%. This depression started with the Stock Market Crash of 1929. The world was in need of a stimulus, but governments were cutting their spending as much as possible. Nations formed barriers to trade, such as the Smoot- Hawley Tariff. It became a law in US in June of 1930, and led to a significant decline in on world trade. US were aiming to protect its domestic industry from foreign competition by this tariff. The great hegemon was not leading the world out of the depression. (DFAIT, “History…”, p. 1)

Other countries also followed US’s path and the result was a decline in the world

GATT’s general aims were to improve the members’ life standards, and help the development of international trade. To achieve these general aims, GATT tried to abolish quotas, eliminate all NTB’s and apply protection through tariffs for the members. Members were able to consult with one another on trade problems, collect data on world trade and study nations’ characteristics and trends. (Lucy, 2) In the second half of the 20th century, GATT was effective at world trade liberalization; led to a massive expansion of world trade. It reduced average tariff on manufacture goods from 40% to 5% in industralized countries. (DFAIT, “History of…”, p.2)

Both GATT and WTO were operating according to four fundamental principles. One of these principles was “Most Favoured Nation (MFN) Treatment Principle.” It was suggesting that “trade must be conducted on the basis of non-discrimination.” (lijx.com, “A History of…”, p.3) According to the principle, all members had to treat each other equally, especially on import and export duties and charges. No one was to give any special trading advantages to another or discriminate against it. There were some exceptions to this principal; as, “unspecified preferential arrangements (to be registered with GATT/WTO), customs unions or free trade areas (in a free trade area, each member maintains its own commercial policies, including its tariff towards non-members; a customs union adopts a unified customs tariff towards non-members) permitted only among developing nations or when certain strict criteria are met, and products originating in developing countries.” (lijx.com, “A History of…”, p.3)

In 1994, GATT became to be unsatisfactory. The “Uruguay Round” was going on for eight years; it was obvious that GATT was not the respected leader of the world trade any more. This was a round full of disagreements that continued between 1986 and 1994. One of the conflicts in this round was faced by US and some members of the European Union, on the agricultural trade case. “At the core of differences on agricultural trade were the enormous government subsidies that some leading producers were paying farmers to keep them competitive internationally.” (Kegley, 222) US aggressively proposed to phase out all agricultural subsidies and farm trade protection programs within a decade. Its proposal gained some support, but European opposition created an ‘impasse’ in negotiations. This caused the original 1990 target date for conclusion of the talks to be missed. (Kegley, 223)

In conclusion, today we are living in an attentively constructed world. One of the causes of such a development is the trade organizations GATT and WTO. GATT was an outcome of bitter experiences. After the WWII, US did not undertake the responsibility of curing the world trade; therefore, someone else had to fulfil the hegemony’s duty and that was the GATT. It was not easy to form a perfect trading system where everyone can benefit. GATT and WTO always strived to achieve better; GATT by using tariffs and eliminating quotas and WTO by lowering tariffs, limiting domestic laws. They used the same basic principles to do that; but WTO had more chance than GATT at striving for better, because it had a model that it could get lessons from. GATT’s duty was harder; it was not built upon something stable. WTO was built upon the somewhat stable GATT. While doing that, WTO formed more efficient programs.

Another principle was “Anti-NTB Principle.” This principle was suggesting that when a member’s domestic industry is given protection right, it has to apply it through custom tariffs, not through other commercial measures. This would make the extent of protection clear. “Fees and charges other than tariffs must be limited to the approximate cost of the services”. Exceptions also exist for this principal with national security, public morals, short supply or domesti

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