The history of international commerce is a pendulum that swings between the extremes of protectionism and free trade. In the early 20th century, many nations embraced isolationist policies to protect domestic industries. A notable example of this was the Smoot-Hawley Act of 1930, which significantly raised import duties and contributed to a decline in global trade. However, the lessons learned from these era of economic instability led to the development of a regulated multilateral framework designed to facilitate commerce, reduce barriers, and prevent trade wars.
The General Agreement on Tariffs and Trade (GATT)
Following the era of protectionism, the international community sought a way to rebuild trade through cooperation. This led to the establishment of the General Agreement on Tariffs and Trade (GATT). GATT was not an organization, but a treaty designed to promote free trade by reducing two primary types of obstacles: tariffs (taxes on imported goods) and nontariff barriers (such as quotas or administrative delays).
Between 1947 and 1988, GATT proved to be highly successful. It managed to reduce average global tariffs from approximately 40% down to just 5%, which in turn multiplied the volume of international trade by twenty times.
The Evolution of GATT Rounds
GATT functioned through successive "rounds" of negotiations, where member nations met to discuss and agree upon new trade rules. As the global economy became more complex, these rounds expanded in scope:
- Early Rounds (e.g., Geneva, Annecy, Torquay): These initial meetings focused almost exclusively on the reduction of tariffs.
- Kennedy Round (1964–1967): This round moved beyond simple tariffs to address antidumping measures.
- Tokyo Round (1973–1979): This period saw the inclusion of nontariff measures and the creation of "framework agreements".
- Uruguay Round (1986–1994): This was the most transformative period in trade history. It addressed much broader areas, including services, intellectual property, agricultural subsidies, and investment measures.
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