GENERAL AGREEMENT

ON TARIFFS AND
TRADE
• The General Agreement on Tariffs and
Trade (GATT) was first signed in 1947.

• GATT was designed to provide an

international forum, that encouraged
free trade between member states by
regulating and reducing tariffs on traded
goods providing a common mechanism
for resolving trade disputes.
 GATT ???

A Treaty, not an Organization

∗ GATT was the outcome of the
failure of negotiating governments
to create the ITO
∗ The Bretton Woods Conference
introduced the idea for an
organization to regulate trade as
part of a larger plan for economic
recovery after World War II
∗ As governments negotiated the
ITO, 15 negotiating states began
parallel negotiations for the
GATT as a way to attain early
tariff reductions
∗ Once the ITO failed in 1950, only
the GATT agreement was left.
 Objective

∗ The GATT's main objective was the “Reduction of

Barriers to International Trade”

∗ This was achieved through the Reduction of

∗ Tariff barriers
∗ Quantitative Restrictions
∗ Subsidies on trade through a series of
agreements
 History

∗ 3 Phases
∗ First Phase , from 1947 until the Torquay
Round

∗ A second phase, encompassing three rounds,

from 1959 to 1979

∗ The Third phase, consisting only of the

Uruguay Round from 1986 to 1994
First Phase

∗ Commodities which would be covered

by the agreement and freezing
existing tariff levels
Year Place/name Subjects
covered

1947 Geneva Tariffs

1949 Annecy Tariffs

1951 Torquay Tariffs

 Second Phase

∗ Focused on reducing tariffs

Year Place/name Subjects covered

1960-1961 Geneva Tariffs

Dillon Round
1964-1967 Geneva Tariffs and anti-dumping
Kennedy measures
Round
1973-1979 Geneva Tariffs, non-tariff
Tokyo Round measures, “framework”
agreements
 Third Phase

∗ Extended the agreement fully to new areas

such as intellectual property, services,
capital, and agriculture. Out of this round
the WTO was born.
Year Place/name Subjects covered

1986-1994 Geneva Tariffs, non-tariff

Uruguay Round measures, rules,
services, intellectual
property, dispute
settlement, textiles,
agriculture, creation
of WTO, etc
 ROUNDS

NAME START DURATION COUNTRIES SUB. COVERED ACHIVEMENTS

1.GENEVA APRIL 7 MONTHS 23 TARIFFS SIGNING OF GATT,

45,000 TARIFF
1947 CONCESSIONS
AFFECTING $10
BILLION OF TRADE.

2. ANNECY APRIL 5 13 TARIFFS COUNTRIES

EXCHANGED SOME
1949 MONTHS
5000 TARIFF
CONCESSIONS.
NAME START DURATION COUNTR SUB. ACHEVEMENTS
IES COVERED

3. SEPT. 1950 8 MONTHS 38 TARIFFS COUNTRIES

TORQUAY EXCHANGED SOME
8700 TARIFF
CONCESSIONS,
CUTTING THE
TARIFFS BY 25%

4. GENEVA JAN. 1956 5 MONTHS 26 TARIFFS, $2.5 BILLION IN

II ADMISSION TARIFF REDUCTION
OF JAPAN

5. DILLON SEPT. 1960 11 MONTHS 26 TARIFFS TARIFF CONCESSION

WORTH $4.9 BILLION
OF WORLD TRADE.
NAME START DURATION COUNTRI SUB. ACHIVEMENTS
ES COVERED

6. MAY 1964 37 MONTHS 62 TARIFFS & TARIFF CONCESSION

KENNEDY ANTIDUMPING WORTH $40 BILLION OF
WORLD TRADE

7. TOKYO SEPT. 74 MONTHS 102 TARIFF, NON TARIFF REDUCTION

1973 TARIFF WORTH $190 BILLION
MEASURES, ACHIEVED.
“FRAMEWORK”

AGREEMENTS

8. SEPT. 87 MONTHS 123 TARIFFS,NON CREATION OF WTO, &

URUGUAY 1986 TARIFFS,RULES, EXTENDED THE RANGE OF

SERVICES,IP,DIS TRADE

PUTE NEGOTIATION,LEADING TO

SETTLEMENT,TE THE REDUCTION IN

Did GATT succeed?
 Continual reductions in tariffs helped spur very high rates
of world trade growth during the 1950s and 1960s —
around 8% a year on average

 Trade growth consistently out-paced production growth

 The rush of new members during the Uruguay Round

demonstrated recognition of multilateral trading system as
the anchor for development and an instrument of economic
and trade reform.
Impact Of GATT
∗ GATT’s success in reducing tariffs to a low level, with a
series of economic recessions 1970-80’s drove
governments to devise other forms of protection for
sectors facing increased foreign competition

∗ High rates of unemployment and constant factory

closures led governments in Western Europe and North
America to seek bilateral market-sharing arrangements
with competitors and to embark on a subsidies race to
maintain their holds on agricultural trade.
∗ Both these changes undermined GATT’s
credibility and effectiveness.

∗ The problem was not just a deteriorating trade

policy environment.
By the early 1980s the General Agreement was
clearly no longer as relevant to the realities of
world trade as it had been in the 1940s
∗ World trade had become far more complex
and important than 40 years before
∗ The globalization of the world economy
was underway
∗ Trade in services — not covered by GATT
rules
∗ Ever increasing international investments
∗ Factors convinced GATT members that a
new effort to reinforce and extend the
multilateral system should be attempted.

That effort resulted in the Uruguay Round,

the Marrakesh Declaration, and the
creation of the WTO.
∗ Whereas GATT was a set of rules
agreed upon by nations, the WTO is an
institutional body. The WTO expanded
its scope from traded goods to trade
within the service sector and
intellectual property rights
∗ The workings of the GATT agreement
are the responsibility of the Council for
Trade in Goods (Goods Council) which
is made up of representatives from all
WTO member countries.
Why was IP Included In
GATT?
Reasons for Including IP on the GATT Agenda:
• Growth in world trading.
• Increased importance of global IP protection.
• Existing provisions of international law were
perceived insufficient.
1. Absence of enforcement of rights before
national judicial authorities.
2. Lack of a dispute settlement mechanism
between States.
3. Standards were outdated.
Drug Prices In India After
GATT Agreement
∗ Inventions should benefit mankind while giving a
degree of advantage to the inventor.
∗ But the central theme of Trade Related Aspects of
Intellectual Property Rights (TRIPS) is to ensure
that the innovator’s rights are protected, even at
the cost of learning millions of the poor to disease
and death.
∗ The first and foremost issue is that a real
difference comes in only regarding drugs
which are under patent in any one of the
WTO member countries.

∗ Indian Government has issued a list of

nearly 300 essential drugs required in
healthcare a high percentage; nearly 90%
of these drugs are of patent.
∗ Pharmaceutical companies use a number
of strategies to promote the sales of their
drugs, especially their patented drugs,
because they plan to make money before
the patent expires.
Ex: Terfenadine
Fexofenadine
∗ A second strategy is to introduce a number of
drugs of more or less same nature.

∗ Ex : The first drug of a class of drugs called

ACE inhibitors introduced was Captopril; which
was followed by Enalapril. Now we have
Lisinopril, Ramipril, Perindopril, Quinapril,
Cilazapril, Benazepril, Fosinopril etc.
∗ Now 85% of the Indian drug market is
generic and 15% is covered by patents.

∗ Patented drugs may be costly.

∗ Regarding the prices of drugs which are not

under patent, we should mention that Indian
drugs are the cheapest in the world.
∗ On average, drugs manufactured in India are
between 1000 and 4000 percent cheaper
than the same products produced in USA.

∗ One reason why generics are so cheap in

India is that in India manufacture of drugs is
very cheap. India is placed fourth in terms of
volume of generic market just after the US,
Japan and Germany.
∗ Indian Pharma companies have the advantage
of very low cost of production of drugs.

∗ Indian companies incur 0.05% of cost of

production compared to developed countries.
This impossible fact is being seen in India
because of very less expensive manpower and
low overheads.
∗ Indian drug prices are well controlled
by the Drug Price Control Orders.
∗ NPPA, the National Pharmaceutical
Pricing Authority was started in August
1997 to keep a proper control over
drug price rise .
∗ GATT has been replaced by WTO.

∗ Even though the functions of GATT had been

taken over by the WTO, it works on the
frame work of GATT.

∗ WTO is the working institutional body.