Volume 42 | Number 3 Summer 2007
Legal Mercantile Evolution from the Twentieth Century to the Dawning of the Twenty-First Century
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II. General Agreement on Tariffs and Trade
Concerned with safeguarding the tariff concessions negotiated during the Havana Conference, twenty-three governments called for their provisional approval while the ITO was being consolidated. As a result, in October 1947, Australia, Belgium, Brazil, Burma, Canada, Cuba, Czechoslovakia, Chile, China, France, India, Lebanon, Luxembourg, the Netherlands, New Zealand, Norway, Pakistan, South Africa, South Rhodesia, Syria, Sri Lanka, the United Kingdom, and the United States approved the GATT, which had been under negotiation since the end of 1945 and during the Havana meetings.9 The GATT established regulations on mutual tariffs, traffic trade, tariff valuation, free trade areas, subsidies, fees, and non-tariff barriers. It went into effect on January 1, 1948.10
Without the ratification of the Havana Charter, the ITO never came into being. Consequently the GATT became a provisional mechanism to govern foreign trade and the only multilateral framework that established foreign exchange regulations. GATT negotiations were of little value for poor countries because very few efforts were aimed at eliminating trade restrictions of elaborate products or at protecting agriculture. Such difficulties drove developing countries to ask the UN to create an organization in charge of examining world trade issues.
Taking the position of developing countries into account, the UN Economic and Social Council (ECOSOC) decided in 1942 to convene a Conference on Trade and Development, which was hosted in Geneva, Switzerland in 1964. All members of the United Nations attended. The Conference established the United Nations Conference on Trade and Development (UNCTAD)11 to deal with foreign trade problems. Hence, two independent organizations for international trade arose, but with no clear distinction between them: the GATT and the UNCTAD.
The GATT ultimately turned out to be a formal provisional agreement that made the 1947-approved tariff concessions possible, as it required no ratification.12 However, the adoption of some regulations related to certain points did not match the domestic legislation of several contrasting parties, so they reached an agreement on a “Protocol of Provisional Application,” known as the Grandfather Clause.13 This clause stipulated that each State was to put GATT principles into practice insofar as they were compatible with their current legislation.14
Despite having been conceived as a provisional commercial agreement, the GATT helped establish a stable and thriving multilateral trade system. Nevertheless, and possibly due to its provisional nature, some regional integration processes continued; for example, with a view to liberalizing trade, Latin American countries established the Latin American Free Trade Association (LAFTA) in 1960.15 Twenty years later, LAFTA would become the Latin American Integration Association (LAIA).16
Eight rounds of negotiations were held during the GATT’s nearly fifty years of existence. The rounds were aimed at specific subjects of foreign trade, such as tariff duties, commercial policies, trade barriers, subsidies, antidumping, safeguards, and technical assistance to developing countries, among others. Negotiations throughout the first four rounds were bilateral. From the Dollon, Switzerland Round in 1960 onward, the European Economic Community acted on behalf of all its representatives, and thus the negotiations took on a multilateral nature. Nevertheless the GATT evidently was in need of reorganization, which led to the Uruguay Round in the 1980s and, finally, to the establishment of the World Trade Organization (WTO).