The World Trade Organization exists because a permanent trade body planned alongside the General Agreement on Tariffs and Trade never got built. In October 1947, 23 countries signed GATT in Geneva to give trade liberalisation an early boost. Talks on a permanent International Trade Organisation began the following month. It took 47 years, and eight rounds of talks, before members finally built that missing institution. The WTO took over from GATT on January 1, 1995.
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Why GATT outlived the body planned beside it
Weeks after GATT was signed, delegates from 56 countries met in Havana to draft a charter for the International Trade Organization. That charter was signed in March 1948. The US Congress never ratified it, and with nothing else to replace it, GATT stayed on as the only instrument governing world trade. GATT ended up running the global trading system for the next 47 years.
What a treaty could do that an institution usually does
GATT’s own text tried to do an institution’s job on its own. Article I set the most-favoured-nation rule: a tariff cut offered to one trading partner had to be extended to every other member. Article III set national treatment, so that once an import had cleared customs it faced the same taxes and rules as a domestic product. Article XI banned import quotas outright, though members could invoke exceptions for a customs union, a balance-of-payments crisis, public health, or national security.
Enforcement ran through a slow procedure that depended on the members themselves. A dispute began with consultations between the two governments involved. If that failed, the other members could appoint a panel to write a report, and only then could they vote to adopt that report as their shared reading of the rules. By December 1994, 127 contracting parties were relying on that process, more than five times the 23 that had signed in 1947.
How eight rounds patched a treaty that kept growing
GATT expanded the only way a treaty can: by negotiating again. A second round, at Annecy in 1949, produced roughly 5,000 tariff concessions. A third, at Torquay the following year, added 8,700 more and cut the original 1948 tariff levels by a quarter. A further round, closed in May 1956, delivered $2.5 billion in cuts. The fifth, the Dillon Round of 1960 to 1962, was named for the US Under Secretary of State who proposed it, and ran alongside talks on the new European Economic Community.
The Kennedy Round, from 1964 to 1967, was where the agenda first moved past tariffs alone, and developing countries began taking a bigger part in the talks. It delivered $40 billion in cuts. The seventh round, opened in Tokyo in 1973 and closed in 1979, went after barriers that were not tariffs at all. It targeted things like subsidies and import licensing, and it achieved more than $300 billion in reductions.
Agriculture kept slipping the net regardless. The Tokyo Round made no progress at all on farm tariffs or export subsidy rules. Textiles fared little better. By 1994, six members, Austria, Canada, the European Union, Finland, Norway and the United States, had notified 145 restraints on textile and clothing exporters under the 1973 Multifibre Arrangement.
Why the Uruguay Round finally built an institution
The eighth round opened at Punta del Este, Uruguay, in September 1986. The BBC’s chronology calls it the most ambitious and far-reaching round so far. It brought big cuts in farm subsidies, opened markets fully to textiles and clothing from developing countries, and widened intellectual property rights. It took nearly eight years. Ministers closed the round at Marrakesh, Morocco, in April 1994, meeting there for the last time under GATT’s own name. The World Trade Organization took over on January 1, 1995, replacing GATT as the basis for trade relations among its members.
What a permanent body could do that the treaty couldn’t
The change showed within seven years. In August 2002, the WTO ruled against the United States in a complaint the European Union had brought over tax breaks for US exporters. It cleared the EU to impose $4 billion in sanctions, the largest award the organisation had made to that point. Membership moved fast too. China joined in December 2001, and Taiwan was admitted weeks later.
The WTO opened its first new round of talks at Doha in November 2001, the ninth since GATT started the habit in 1947. Giving the process a permanent address didn’t retire it. It just gave the next round somewhere to happen.
