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The General Agreement on Tariffs and Trade

Buy custom The General Agreement on Tariffs and Trade essay

Introduction

The General Agreement on Tariffs and Trade is a multilateral agreement that was formed with the sole objective of regulating international trade. It was negotiated during the UN conference meeting on employment and trade. It took effect in 1947 when governments had failed to create international Trade organization. The main purpose of GATT was reduction of trade barriers and tariffs and elimination of preferences on a reciprocal and mutually advantageous basis.           

It was established in Geneva to provide a framework upon which international trade would be regulated. From the beginning, the charter envisioned the formation of an International Trade Organization. However, member governments never ratified this.   Consequently, the General Agreement on Tariffs and Trade continued being governed by interim or provisional measures. This implies that GATT remained an organization without a formal structure. This early pitfall provides a glimpse of why enforcement of the treaty may have stalled. The provisional measures reigned until 1994, from where the Uruguay Round Agreement was completed at the World Trade Organization.

The world trade organization (WTO) was established in 1995 to guide the administration of rules in reference to trade among countries. Its function was intended to liberalize and supervise international trade. Its main purpose was to regulate trade between participating countries and provide a frame work of formalizing and negotiating trade agreements. This was in part due to the inability of GATT to effectively deal with the distortions occasioned in the agricultural sector and the international trading system.  This multilateral organization’s principal function would be to monitor negotiations aimed at reducing trade barriers. In addition, the organization would check market distortions and in the process facilitate economic growth and development. The organization also offered a platform for countries to air their grievances concerning international trade.

Importance of regulating Imports

It is very crucial to regulate the importation of goods to protect local manufacturers. Lack of import regulation in many developing countries will not sustain the work force leading to layoffs (Anderson, Francois, Hoekman & Martin et al., 2001) .It is very crucial to regulate imports to prevent protect the country from poisonous goods. In many occasions when there is no regulation of imports illegal goods are sneaked to the country, Dangerous weapons may also find its way to the country i.e. explosives and poisonous foods.

Non tarrif barriers restrict imports but are not in the usual form of a tariff. An example is imposing Quotas, administrative delays, Local content and quotas embargoes. Non tarrif barriers enable governments to make crucial decisions to protect producers in their country. Failure to do so, local industries will close down resulting to loss of Jobs. Non tariff barriers are permitted in very limited circumstances when there is a need to protect safety, sanitation, and healh. They have also been criticized as an avenue to evade free trade rules such as those of WTO. For example in the application of WTO-GATT and other treaties to agricultural products has over-time faced controversy.

Both the European Union and the United States of America are big exporters of agricultural products. Through the advancement of subsidies to local farmers, the countries thus espoused the notion of protectionism. Adopting these subsidizing measures had a host of consequences. For instance, such a move would badly lead to destabilization in market prices. Agriculture for example, has undergone a different history at GATT.  The silence of the treaty on the matter meant that agriculture was to be treated just as any other product in international trade. Despite this realization, some articles under GATT extended exceptional status to agricultural products. This, perhaps indicate that the drafters of the charter were aware of the political sensitivity involved in the agricultural sector. However, the fact that in a subsequent round of talks, agriculture featured indicates the fact that the sector was highly regarded.

Article xi of GATT restricts the use of quotas but offers exceptions, which describe when the restrictions may be, waived (Keeney et al., 2003).  Article xii provided for exceptions on agriculture in reference to balance of payments. The latter exemption paves way for countries to defy restrictions on trade in agriculture. This implies that poor countries can use their balance of payment statuses to break any barriers on trading in agriculture. However, the rich countries like those from the European Union and the United States of America could not rely on this provision since their balance of payments then could not be on the deficit side. This provision literarily offered a way out of rule observance. If there was a provision for exemption, then it implies that the aspect of universal rule application could not hold. The failure to develop universal rules provides an indicator of why there were big chances of failed application of the charter. The logic of this argument is premised on the fact that exemptions amount to application of double standards. Put in pedestrian terms, the same rules cannot apply differently to individuals or groups dealing in the same trade.

The provision by Article XI: 2 that export restrictions could be used to relieve or prevent critical shortages of food or other commodities required by the exporting countries present the first hurdle in the applicability of the treaty (Keeney et al., 2003). That export and import restrictions could be applied to facilitate the implementation of regulations or standards for purposes of classification, marketing and/or grading of products in international trade went a step further to poke holes in the treaty. In addition, that the restrictions can be introduced in reference to fishery or agricultural products imported in whichever form important for the enforcement of government standards to operate further compounded the treaty’s feasibility.  This meant that a government could restrict the marketing or the production of a product, which was seen as a close substitute, or do away with temporary surplus by making available its surplus to the citizens freee of charge. Governments were also given the leeway to censure quantities of animal products, which directly depend mainly or wholly on an imported product.

From the very beginning, the drafting of the GATT rules and regulations were not consistent. The inconsistencies were shown by the sheer determination by the drafters to gain a foothold in the various sectors of the global economy. However, as it turned out, no major player was in a position to have things their way. As a result, countries like the United States sought exit options.  Based on this realization, the drafting of the treaty was partly to blame when it came to application since exemptions amounts to the application of double standards.

The application of the GATT rules failed since it appeared as if the European union and the united states of America were hell bent on using the organization as a platform to advance their needs especially in the field of agriculture. The fact the united states had its way in seeking waivers described as a ‘waiver of waivers’, it became clear that the application of the standards was not uniform. Any attempt, which entails a selective application of rules and regulations, was bound to be intractable. Come the shift from GATT to WTO, things did not change as could be anticipated either. The adoption of URAA recommendations on a variety of issues as starting points indicated that WTO was not ushering in a new dawn after all. The stalling of negotiations at the Doha Round is a pointer to this. At the talks, it became apparent that the developed world was attempting to open the world economy in a manner suggesting a mission to undermine the developing world.

Liability of International carriers

Ocean and Air carriers are normally liable for loss, damage, and delay of cargo except in cases arising from the act of God, inherent nature, and act of the shipper from its acceptance of cargo to its delivery. Many companies receive or ship goods internationally and often use the service of intermediaries. These companies offer services of handling cargo arranging transportation with ocean carriers and air and also assist shippers with the legal hurdles involved in moving freight internationally. Intermediaries come in handy. An ocean transportation intermediary is licensed by Federal Maritime Commission to be an ocean freight forwarder .According to the Warsaw convention the carrier is liable unless there is inherent defect, quality or vice of cargo, contributory negligence of the shipper or an act of war.

Conclusion

It emerges that the intention to use WTO-GATT to reign on international trade was a noble idea. However, the development of rules and their implementation has attracted controversies. The application of double standards in the form of waivers presents the major obstacle constraining the success of international treaties. Whether real or imagined, the view that double standards undermine the efficacy of rule application is held. From the inception of GATT, there was a host of ambiguities, which gave leeway to member countries to consider their options and engage in what they perceived beneficial to them.

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