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International Institutions and Trade 101: The General Agreement on Tariffs and Trade (GATT) . [1]

['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']

Date: 2025-04-23

Founded after World War II, the General Agreement on Tariffs and Trade created a set of tariff agreements between the United States and mostly European countries. The idea behind the GATT was to gradually reduce tariffs on industrial goods. The reason for the establishment of the GATT was that protectionist tariffs before World War II had been disasterous and were partly responsible for the Great Depression in the United States in the 1930s.

The negotiations that led to the establishment of the GATT created the beginnings of what would eventually become the European Union and the World Trade Organization (those two topics should be the subject of another set of diaries).

When it was established, The General Agreement on Tariffs and Trade only regulated industrial products - products like washing machines, sewing machines, hand mixers, radios, bicycles, etc. The GATT also regulated the component parts of industrial goods.

The GATT created a customs union, or set of trade agreements between countries, where countries would agree to lower tariffs on industrial goods. In general, many tariffs are not a good idea. They raise prices for consumers because they increase the price that a consumer pays.

Tariffs also prevent countries from trading goods freely. Some countries may do a better job of producing some industrial goods and it makes sense for countries to trade with each other because it gives consumers a wider range of products to purchase.

Reducing tariffs also gives industries a wider selection of the inputs that they need to make cars, bicycles, or appliances. Many industrial goods require component industrial parts - screws, nails, specific types of wheels or gears. If you think about a bicycle, think of all the component parts of a bicycle. Some of those components may be made better in a different country, so it makes sense for a bicycle manufacturer to import bicycle components from other countries.

For companies, being able to import from a wider range of countries without paying a tariff, or import tax, means that the end product will be cheaper and made with better components.

Sometimes, a country might put tariffs on selected products in order to protect a new or changing industry. Sometimes an industrial sector is just emerging in a country (a country may be developing a new clothing industry, for instance). In the 1980s, the United States placed tariffs on Japanese cars in order to give the United States auto industry time to catch up to the Japanese auto industry. Usually, protective tariffs are placed strategically for a certain part of the economy against specific countries.

After the initial establishment of the GATT, economic ministers from different countries met every decade to negotiate lowering more tariffs in a series of trade meetings called "Rounds". The trade meetings were usually named after the country or city where the trade meetings were held, for instance, the Uruguay Round.

The GATT did not initially cover trade in agricultural goods, which helped protect the United States Farm Bill, which was a form of price support for agricultural goods in the United States. Countries in Europe also have similar farm support programs.

The GATT also did not cover taxes or tariffs on services and intellectual property rights. Negotiations over agriculture, services, and property rights began in the 1980s and 1990s. These negotiations were very contentious, and led to protests in places where the negotiations were happening. For instance, there were large protests at a trade meeting in 1999 in Seattle, Washington. I can verify that those protests happened because I was in Seattle to protest unjust trade laws. There was no Seattle Round.

Negotiations around trade are not neutral. I have presented a general outline of the General Agreement of Tariffs and Trade, but international trade agreements are rooted in historical colonialism and imperialism and have often benefitted those countries with the most power.

Note: my version of Wikipedia has mostly garbage in its sections on international trade. Using a Samsung Tablet, I tried searching for TRIPS TRADE using the Firefox browser and DuckDuckGo as the search engine and I got many results that were incorrect. (I also tried the search with the Chrome browser and the Google search engine). I am too disabled to individually correct the mistakes, but other experts on global trade law should be aware of the many inaccuracies on the world wide web (what we commonly call the internet).

Also, be careful in assessing the truth of any comments on this diary. There are some commenters who post inaccurate information on diaries. Many comments are thoughtful and informative, but some are just maladjusted troll trash. (With my apologies to trolls - I have been to Mt Horeb, Wisconsin and seen the Troll Way).

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