GATT vs. WTO

GATT expands to General Agreement on Tariffs and Trade, is an international trade treaty, that came into existence in the year 1947, just after the second world war, as a result of Bretton Woods Agreement. It is a multilateral legal agreement which was signed by 23 nations. It was enacted to bolster the economic recovery which aimed at expanding world trade, by abolishing those trade barriers, such as reducing tariff, quota, subsidies etc.

There are three main provisions made in this regard, which are:

• When it’s about the tariff, all the member nations are considered as equal.
• Restriction on the number of imports and exports are prohibited but subject to certain exceptions.
• Special provisions are made to encourage trade of developing nations.

WTO

WTO stands for World Trade Organization, is the sole international body concerned with the provisions of cross-country trade, based in Geneva, Switzerland. Basically, there is an agreement called WTO agreement, which is duly signed and negotiated by member nations of the world and confirmed in their parliaments.

In the real sense, WTO is a place, where the governments of member countries attempt to resolve their trade problems, encountered by them during the trade with other countries. The member governments (who can be ministers or their ambassadors or delegates) operate WTO and all decisions are also taken by consensus.

The Differences between GATT and WTO

• GATT was ad-hoc and provisional. The WTO and its agreement are permanent with WTO having a sound legal basis because members have ratified the WTO agreements.
• GATT refers to an international multilateral treaty to promote international trade and remove cross-country trade barriers. On the contrary, WTO is a global body, which superseded GATT and deals with the rules of international trade between member nations.
• While GATT is a simple agreement, there is no institutional existence, but have a small secretariat. Conversely, WTO is a permanent institution along with a secretariat.
• The participating nations are called as contracting parties in GATT, whereas for WTO, they are called as member nations.
• The grandfather clause in the Protocol of Provisional Application in GATT 1947 has not been carried forward to WTO. WTO contains an improved version of original GATT rules-GATT Rules 1994.
• GATT commitments are provisional in nature, which after 47 years the government can make a choice to treat it as a permanent commitment or not. On the other hand, WTO commitments are permanent, since the very beginning.
• The scope of WTO is wider than that of GATT in the sense that the rules of GATT are applied only when the trade is made in goods. As opposed to, WTO whose rules are applicable to services and aspects of intellectual property along with the goods.
• GATT agreement is primarily multilateral, but the plurilateral agreement is added to it later. In contrast, WTO agreements are purely multilateral.
• The domestic legislation is allowed to continue in GATT, while the same is not possible in the case of WTO.
• The dispute settlement system of GATT was slower, less automatic and susceptible to blockages. Unlike WTO, whose dispute settlement system is very effective.