Study Guides/Economics/GATT Full Form
Study Guide · Economics

What is the Full Form of GATT?

After the massive destruction of World War II, the countries of the world realized that if they constantly fought over money and placed heavy taxes on each other's goods, another war would start. To prevent this and promote global peace through business, a historic treaty called GATT was signed.

Question (Click to Flip)

What is a Tariff?

Answer

A tariff is a direct tax imposed by a government on imported goods coming from a foreign country. Governments use tariffs to make foreign goods expensive so that citizens are forced to buy locally made goods instead.

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Key Facts

During its 47-year existence, GATT successfully held eight massive 'Rounds' (global meetings). The final and most famous one was the 'Uruguay Round', which lasted for 7 years and resulted in the creation of the WTO.

India was one of the 23 original founding members who signed the GATT agreement in 1947.

1. The Full Form

In international economics, the full form of GATT is the General Agreement on Tariffs and Trade.

2. What was the purpose of GATT?

  • Signed in 1947: GATT was a massive legal agreement signed by 23 countries right after WWII.
  • The Main Goal: Its absolute primary objective was to reduce Tariffs (heavy import taxes) and remove international trade barriers (Quotas).
  • How it worked: Before GATT, if India tried to sell cotton to America, America would put a 50% tax on it, making it too expensive to sell. GATT forced all countries to sit at a table, shake hands, and agree to drastically lower these taxes. This allowed goods to flow freely across borders, boosting the global economy and reducing poverty.

3. The End of GATT and Birth of WTO

While GATT was highly successful in reducing taxes on physical goods (like cars and clothes), it had a major flaw. It was just a 'paper agreement', not an actual organization. It had no real legal power to punish a country if it broke the rules, and it did not cover modern trade like software services or intellectual property (patents).

Because of these weaknesses, GATT was officially retired and completely replaced on January 1, 1995, by a much more powerful, permanent global institution: The World Trade Organization (WTO).

Questions and Answers

What is a Tariff?+

A tariff is a direct tax imposed by a government on imported goods coming from a foreign country. Governments use tariffs to make foreign goods expensive so that citizens are forced to buy locally made goods instead.

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