Difference Between GATT and WTO

GATT vs WTO

 

There are many who get confused between the now defunct GATT and WTO and fail to identify the key difference. GATT stands for General Agreement on Tariffs and Trade. This created in 1948 was replaced by WTO or else the World Trade Organization. When paying attention to the various practices, structures, focus and scope of the two organizations, we can clearly identify a difference. This article will explain the major differences between GATT and WTO.

What is GATT?

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 eight years in GATT.

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 that led to many disputes. In comparison to GATT, the WTO is much more powerful. In the next section, we will be paying attention to the WTO.

What is WTO?

WTO stands for World Trade Organization. GATT was replaced by World Trade Organization in 1995. There are more than 125 members of WTO, and more than 90% of total international trade is governed by the rules of WTO. The most notable difference is the establishment of a dispute settlement mechanism that has the power to impose trade sanctions against erring parties.

WTO has much stronger provisions for enforcement of the rules. If a member state is aggrieved, it can lodge a 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. This highlights that a clear difference exists between the two organizational bodies. This difference can be summarized as follows.

What is the Difference Between GATT and WTO?

Definitions of GATT and WTO:

GATT: GATT stands for General Agreement on Tariffs and Trade.

WTO: WTO stands for World Trade Organization.

Characteristics of GATT and WTO:

Organization:

GATT: GATT had a provisional legal agreement.

WTO: WTO has legally permanent provision.

Members:

GATT: The members were called contracting parties in GATT.

WTO: Unlike in GATT, they are real members in WTO.

Scope:

GATT: GATT was limited to trade in goods only.

WTO: The scope of WTO is broader with services and intellectual property rights also included in it.

Power:

GATT: GATT was weak.

WTO: WTO is more powerful.

Domestic Legislation:

GATT: GATT allowed domestic legislation to continue.

WTO: WTO does not permit this practice anymore.

 

 

 

Image Courtesy:

1. “WTO2005” [CC BY-SA 3.0] via Wikimedia Commons

2. World Trade Organization (Logo and wordmark) By World Trade Organization [Public domain], via Wikimedia Commons