Trade Agreements
General Agreement on Tariffs and Trade (GATT) was an agreement between different countries that was signed to regulate international trade. The main aim of the agreement was to remove unnecessary trade barriers and to reduce tariff (Stiglitz and Charlton, 2005). Such measures were done to the advantage of the participating countries. The agreement was first negotiated during a conference held by the United Nations. The main agenda of the conference was to form an international organization that would effectively regulate employment and trade. GATT was first signed by 23 nations during its establishment in1947 (Hoekman and Mavroidis, 2015. P.9). The agreement was in effect from 1948 (Stiglitz and Charlton, 2005). The organization continued to operate until 123 nations signed in 1994 (Hoekman and Mavroidis, 2015, p.10). As a result, the Uruguay Round Agreements led to the establishment of World Trade Organization in 1995 (Stiglitz and Charlton, 2005). The original provisions of GATT still operated under the WTO framework.
It is important to note that the Uruguay Round started in 1986 (Matsushita et al. 2015, p.45). The round is the most ambitious in history. It aimed at expanding the competence of GATT to other sectors of economy so that involved countries would have significant improvements in their economy. The round also aimed at diversifying the economies of involved countries. It covered new areas of the economy such as agriculture, services, intellectual property, textiles, and capital (Stiglitz and Charlton, 2005). One hundred and twenty-three countries participated in the round thus indicating that it received major support from different countries. It is worth noting that the Uruguay Round established the initial set of multilateral negotiations of trade (Matsushita et al. 2015, p.48). Developing nations played a major role in the negotiations of the trade agreement.
In the previous agreements, agriculture was exempted since it was given a special place in different areas such as export subsidies and import quotas. By the time of formation of the Uruguay round, several countries considered agriculture into agreements (Stiglitz and Charlton, 2005). Consideration of agricultural products became an important issue with time since several countries were actively involved in that sector as well as diversifying their economy. Some of the countries that pushed for inclusion of agriculture include medium and small-sized exporters of agricultural products (Bagwell and Staiger, 2011, p.1246). Some of those countries include Brazil, Canada, New Zealand, Australia, and Indonesia among others.
The consideration of agriculture in the Uruguay Round is said to be one of the most significant trade liberalization agreements involving agricultural products. As a result of trade negotiations on agricultural products, countries especially those that exported agricultural products benefited a lot (Matsushita et al. 2015, p.51). The agreement made in the Uruguay Round was meant to improve the access to market of agricultural products. Access was improved through increasing subsidies, removal of unnecessary quotas as well as elimination of trade barriers (Stiglitz and Charlton, 2005). Harmonization of phytosanitary and sanitary measures was done between different countries that signed the trade agreement.
When the WTO was formed, it’s the scope of GATT expanded to cater for more trade items than before (Stiglitz and Charlton, 2005). The intellectual property rights and the service sector were included in the agreement. The WTO was formed to serve different countries during the GATT negotiations rounds. The agreements made caused a major fragmentation between the involved countries and also created selective trading among member states (Stiglitz and Charlton, 2005).
Trade liberalization especially on agriculture after the Uruguay round affected the member countries significantly. Due to the initial negotiations during the first rounds, tariffs were reduced. Reduction of tariffs increased trade activities among the member countries. After the Kennedy round, the tariff levels were approximately 15% (Buono and Lalanne, 2012, p.271). By the Uruguay round, it is important to note that tariffs reduced below 5% (Buono and Lalanne, 2015, p.271). The Uruguay round helped to improve trade involving agricultural products between member countries. It, therefore, improved the standards of living of people and increase in foreign exchange.
Apart from improving terms on trade tariffs, GATT also contributed to liberalization of trade through binding the tariff reductions for a long period. Other forms of liberalization include increasing transparency of different trade policies, non-discrimination of countries, forming a forum to negotiate trade terms and conditions as well as resolving bilateral disputes of trade Stiglitz and Charlton, 2005. All these factors led to reduction of policy uncertainty and trade barriers (Matsushita et al. 2015, p.57). The elements also led to rationalization of different trade policies.
After the Uruguay Round, different countries had a good chance of diversifying their economy since the sale of agricultural products was highly encouraged. Developing countries could export their products to developing nations. Exports then led to increased foreign exchange and improved standards of living of the people living in such countries (Buono and Lalanne, 2012, p.274). The developed countries importing agricultural products could engage in food processing activities thus increasing income.
The most important thing about the Uruguay Round is that it recognized the effects of local agricultural policies on international trade. The Round therefore focused on issues such as export subsidies and border controls. It also concentrated on different issues related to agricultural policies. The policies that affected the producers were made subject to negotiation and close scrutiny to ensure that they different countries conducted fair trade.
Works Cited
Bagwell, Kyle, and Robert W. Staiger. “What do trade negotiators negotiate about? Empirical evidence from the World Trade Organization.” The American Economic Review Vol.101, No.4 (2011): 1246-1273.
Buono, Ines, and Guy Lalanne. “The effect of the Uruguay Round on the intensive and extensive margins of trade.” Journal of International Economics Vol.86, No.2 (2012): 271-283.
Hoekman, Bernard M., and Petros C. Mavroidis. World Trade Organization (WTO): Law, Economics, and Politics. Routledge, 2015. Print.
Matsushita, Mitsuo, et al. The World Trade Organization: law, practice, and policy. Oxford University Press, 2015. Print.
Stiglitz, Joseph E, and Andrew Charlton. Fair Trade for All: How Trade Can Promote Development. Oxford UP, 2005. Print.
