The General Agreement on Tariffs and Trade (GATT) is the most important legal source of world trade law. It was negotiated during the United Nations Conference on Trade and Employment after efforts to create the International Trade Organization remained without success. The original GATT text from 1947, subject to modifications from 1994, is still in effect, even if it has become part of the World Trade Organization which has been in force since its establishment in 1995. Until today, 164 nations have entered the WTO and must therefore also comply with the provisions of the GATT. As for the Netherlands, it signed the GATT on January 1, 1948 and became part of the WTO with its establishment in 1995. Also, the Czech Republic signed the GATT in 1993 and entered the WTO in 1995. Apart from the GATT, crucial legal bases on which the WTO is acting are the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
When negotiated, the GATT was a multilateral agreement regulating international trade. Simultaneously it is to be understood as a discussion forum for international trade problems as well as a body for multilateral trade negotiations.
After the horrors of the Second World War, the international community set itself the objective to reintegrate the global economy fundamentally. The goals pursued by the GATT are explicitly enumerated in the preamble, namely raising the standard of living, ensuring full employment, increasing the real incomes, the effective demand and the production. Globally, this also entails the full use of the world’s resources and expanding the production and exchange of goods. Special emphasis is put on the support of developing countries, as they represent three quarters of the 130 signatory countries.
In order to realize these ambitious ideas, the signatory states declared to enter into “reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce”.
Among the various functions of the WTO, these are regarded by analysts as the most important:
- It oversees the implementation, administration and operation of the covered agreements.
- It provides a forum for negotiations and for settling disputes.
Additionally, it is the WTO's duty to review and propagate the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Another priority of the WTO is the assistance of developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training.
- The WTO shall facilitate the implementation, administration and operation and further the objectives of this Agreement and of the Multilateral Trade Agreements and shall also provide the frame work for the implementation, administration and operation of the multilateral Trade Agreements.
- The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the Agreement in the Annexes to this Agreement.
- The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes.
- The WTO shall administer Trade Policy Review Mechanism.
- With a view to achieving greater coherence in global economic policy making, the WTO shall cooperate, as appropriate, with the international Monetary Fund (IMF) and with the International Bank for Reconstruction and Development (IBRD) and its affiliated agencies.
The above five listings are the additional functions of the World Trade Organization. As globalization proceeds in today's society, the necessity of anInternational Organization to manage the trading systems has been of vital importance. As the trade volume increases, issues such as protectionism, trade barriers, subsidies, violation of intellectual property arise due to the differences in the trading rules of every nation. The World Trade Organization serves as the mediator between the nations when such problems arise. WTO could be referred to as the product of globalization and also as one of the most important organizations in today's globalized society.
The WTO is also a centre of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.Finally, the WTO cooperates closely with the two other components of the Bretton Woods system, the IMF and the World Bank.
The WTO establishes a framework for trade policies; it does not define or specify outcomes. That is, it is concerned with setting the rules of the trade policy games. Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO:
- Non-discrimination. It has two major components: themost favoured nation (MFN) rule, and the national treatment policy. Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas.
- Reciprocity. It reflects both a desire to limit the scope of free-riding thatmay arise because of the MFN rule, and a desire to obtain better access to foreign markets.
- Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions.
- Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO.
- Safety values. In specific circumstances, governments are able to restrict trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health (National, 2018; World, 2018).