General Agreement on Tariff and Trade (GATT)

UN agency for promotion of free trade between signatory countries (called contracting parties). Formed in 1947 in Geneva, its objective was to counter the devastating effect of protectionist measures (such as the US Smoot-Hawley tariff that raised import duties from 39 percent to 53 percent) supposedly intended to mitigate impact of the great depression. GATT instituted a rule-based multilateral trading system for trade in both goods and services through a series of negotiations (called 'rounds'). It succeeded in achieving reduction in the average tariff on manufactured goods from 40 percent to about 5 percent in the industrialized nations, and in obtaining varying degrees of promised reductions from less developed nations. Its approach was based on two non-discriminatory principles, the (1) Most favored nation and national treatment, and (2) Reciprocity. It worked to eliminate all non-tariff barriers and import quotas, and advocated use of countervailing duties to fight dumping and to negate the effects of subsidies. On January 1, 1995, after the culmination of Uruguay Round, GATT was replaced by World Trade Organization (WTO).