The third provision was added in 1965 and is addressed to developing countries acceding to GATT. Developed countries have agreed to abolish tariffs on imports from developing countries in order to stimulate these economies. Lower tariffs also had benefits for developed countries. As the GATT increased the number of middle-class consumers around the world, the demand for trade with developed countries increased. In preparation for the GATT, the 23 signatories negotiated among themselves to reduce certain tariffs and other barriers to trade. Canada has negotiated bilaterally with seven of these countries. His talks with the United States were the most in-depth of the time. Canada negotiated trade agreements with the United States in 1935 and 1938, but after the two countries signed the GATT, it became the basic agreement on trade relations between them, replacing the 1938 agreement (see Canada-U.S. Economic Relations).
GATT rules required each member country to grant all members the same privileges in terms of tariffs and other trade policy measures as most-favoured-nation treatment with which it negotiates. This is known as the most-favoured-nation principle and was introduced to eliminate discrimination in trade. The original intention was to establish a third institution responsible for the trade dimension of international economic cooperation, joining the two Bretton Woods institutions, the World Bank and the International Monetary Fund. More than 50 countries participated in the negotiations for the establishment of an International Trade Organization (ICO) as a specialized agency of the United Nations. OTI`s draft charter was ambitious. It went beyond global trade disciplines to include rules on employment, commodity agreements, restrictive business practices, international investment and services. The goal was to create ITO in 1947 at a United Nations conference on trade and employment in Havana, Cuba. However, some basic principles remained unchanged until the Uruguay Round, the most important of which was the positive consensus rule that existed under GATT 1947. For example, it took a positive consensus in the GATT Council to refer a dispute to a panel. A positive consensus meant that neither party could oppose the decision. It is important that the parties to the dispute have not been excluded from participation in this decision-making process. In other words, the respondent could block the establishment of a panel.
Moreover, the adoption of the panel report also required a positive consensus, as well as the approval of countermeasures against a non-executive respondent. Such actions could also be blocked by the defendant. Canada has also developed its own share of import restrictions on grains, dairy products and poultry, as well as export subsidies for certain dairy products and eggs to dispose of surpluses. As a result, the first GATT exclusions and exemptions led to a maze of restrictions on agricultural imports and export subsidies that have since harmed world production and trade in these product lines (see protectionism). In the early years, the GATT round of trade negotiations focused on further tariff reductions. Then, in the mid-sixties, the Kennedy Round resulted in a GATT anti-dumping agreement and a section on development. The Tokyo Round in the seventies was the first major attempt to remove trade barriers that do not exist in the form of tariffs and improve the system. The eighth, the 1986-94 Uruguay Round, was the last and most important of all. This led to the WTO and a new set of agreements. The basic rules set out in Article XXIII:2 of the GATT 1947 provided that the contracting parties themselves must jointly decide disputes between the different contracting parties. As a result, the disputes of the early years of GATT 1947 were settled by decisions of the Chairman of the GATT Council.
Subsequently, they were referred to working groups composed of representatives of all interested parties, including the parties to the dispute. These working groups adopted their reports by consensus. They were quickly replaced by bodies composed of three or five independent experts who had nothing to do with the parties to the dispute. These bodies prepared independent reports containing recommendations and decisions aimed at resolving the dispute and referred them to the GATT Council. It was only with the approval of the GATT Council that these reports became legally binding on the parties to the dispute. The GATT bodies thus built up a jurisprudence that is still important today and adopted in their reports an increasingly rules-based approach and a style of legal argumentation. In 1970, imports and exports of U.S. goods and services accounted for only about 11.5% of gross domestic product. This figure rose rapidly to 20.5% in 1980 and averaged around 24% at the end of the century. (In addition, a persistent trade deficit emerged in the mid-1980s, with imports significantly exceeding exports year after year – imports, for example, exceeded exports by 3% of GDP in 1987.) The GATT also condemned dumping (selling goods abroad at a price below the domestic market). Anti-dumping duties could be applied to countries engaged in such practices where material injury has been caused or is threatening to occur to the domestic industry, or where such practices have prevented the establishment of a domestic industry. For almost half a century, the basic legal principles of GATT remained largely unchanged as they were in 1948.
In the 1960s, additions in the form of a section on development and plurilateral arrangements (i.e. with voluntary membership) were made in the 1970s, and efforts to further reduce tariffs continued. Much of this has been achieved through a series of multilateral negotiations known as trade rounds. The greatest progress in the liberalization of international trade has been achieved through these rounds, which have taken place under the auspices of the GATT. In addition, countries could restrict trade on national security grounds. These included the protection of patents, copyrights and public morality. The most influential group was the quadrilateral informal group, or “Quad” as it was called, which emerged early in the history of GATT. The group included Canada, Japan, the United States and the European Union – the largest trading companies in the world at the time. The Quad introduced the most reciprocal tariff reductions under GATT, reducing rates in all GATT countries on the basis of the most-favoured-nation principle. The Quad became a more formal alliance at the 1981 G7 Summit in Montebello, Quebec. It had the most influence during the Uruguay Round, when it gave priority to agricultural negotiations and pushed for the creation of the WTO.
The GATT continues to be the foundation of the WTO. The 1947 agreement itself is no longer valid today. However, its provisions were incorporated into the GATT 1994 Agreement, which sought to maintain trade agreements during the creation of the WTO. The GATT 1994 is therefore itself an integral part of the WTO Agreement. In contrast, ITO has established a code of global trade principles and a formal international institution. The architects of OTI were heavily influenced by John Maynard Keynes, the British economist.