GATT vs WTO
General Agreement on Tariffs and Trade is commonly referred to as GATT. It was created in 1948 with the aim of bolstering international trade by reducing trade barriers between countries through negotiations. It was replaced by World Trade Organization in 1995 after prolonged deliberations that continued for 8 years in GATT. There are more than 125 members of WTO and more than 90% of total international trade is governed by the rules of WTO. There are many who get confused between the now defunct GATT and WTO. This article will explain the major differences between GATT and WTO.
GATT was under International Trade Organization that worked under the aegis of the UN. However, ITO got sidelined as US refused to ratify it which is why GATT itself evolved a new organization called WTO. The last round of GATT was held in Uruguay in 1993 before it transformed into WTO. Though there were rules in GATT for resolution of disputes, it did not have enforcement power which led to many disputes. WTO has much stronger provisions for enforcement of the rules. If a member state is aggrieved, it can lodge complaint with WTO that will strive to ensure that the transgressor complies with the provisions of WTO. WTO can even impose trade sanctions against erring members as a last resort. The very fact that GATT, which started with a mere 23 members in 1948 was instrumental in associating over one hundred more members till it got rechristened as WTO is a reflection of the efficacy of the organization.
What is the difference between GATT and WTO?
• As an organization, GATT had provisional legal agreement whereas WTO has legally permanent provision.
• Whereas the members were called contracting parties in GATT, they are real members in WTO.
• While GATT was limited to trade in goods only, the scope of WTO is broader with services and intellectual property rights also included in it.
• The most notable difference is the establishment of a dispute settlement mechanism that has the power to impose trade sanctions against erring parties.
• While GATT allowed domestic legislation to continue, WTO does not permit this practice any more.
• GATT was weak while WTO is more powerful.