The General Agreement on Tariffs and Trade (GATT) was created after World War II as one of three international organizations intended to oversee postwar economic relations; the other two were the International Monetary Fund and the World Bank. The idea of such an organization first originated with a Preparatory Committee, established in February 1946 by the United Nations Economic Council, to develop an agenda and proposals for an international conference on trade and employment. This resulted in a charter for a proposed International Trade Organization (ITO), which was supported by the United States. More bilateral negotiations culminated in a draft charter, which was amended in successive conferences held in 1946-1948 in London, New York, Geneva, and Havana. The latter gave its name to the final version, created there in March 1948, but key countries objected to parts of the ITO charter and the organization was never established. However, 23 countries agreed to sign the GATT, which was finalized in Geneva in October 1947, the same month that President Harry Truman used his authority under the Reciprocal Trade Agreements Act (RTAA) to join GATT. In 1962 President John F. Kennedy signed the U.S. Trade Expansion Act (Public Law 87-794); Section 235.2(b) which authorized the president to enter into trade agreements with other countries and established the post of special representative for trade negotiations in the executive office.
The passage of the British Corn Laws in 1832 and their repeal in 1846 led to free trade in corn and to the Cobden-Chevalier Treaty (1860). This agreement reduced tariffs throughout Europe. Problems with tariff regulation have always been an unavoidable factor in trade policy, as have concerns about labor standards and their impact on international economic competition. The development of international labor standards in the nineteenth century and the creation of the International Labor Organization (ILO) in 1919 were centrally related to commercial considerations. The Treaty of Versailles, which created the ILO, recognized that the "failure of any nation to adopt humane conditions of labor is an obstacle in the way of other nations which desire to improve the conditions in their own countries."
The Tariff Act of 1930 (also called the Smoot-Hawley Tariff Act after the two legislators who sponsored it) raised tariff rates on most articles imported by the United States, triggering comparable tariff increases by U.S. trading partners. Since its passage, Smoot-Hawley has been amended by subsequent legislation, beginning with the 1934 U.S. Reciprocal Trade Agreements Act, which amended the Tariff Act of 1930. The Reciprocal Trade Agreements Act delegated to the U.S. president the power to enter into reciprocal agreements to lower tariffs.
At the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, in July 1944, 44 countries met and agreed on a global fixed-rate foreign exchange system. This system laid the groundwork for the International Monetary Fund, the World Bank, and the GATT, which were founded in 1944-1945. An International Trade Organization (ITO), with much support from U.S. Department of State officials, became a highly acclaimed institution for the implementation of bilateral negotiations conducted with the British. The organization was to be part of the postwar economic order because, by 1945, the United States had entered into 32 bilateral agreements reducing tariffs. The results of the bilateral negotiations were published in a pamphlet, Proposals for Expansion of World Trade and Employment, the first version of U.S. plans. The United States expanded this document into a draft charter and amended it in successive conferences between 1946 and 1948. The conferences convened in London, New York, Geneva, and Havana; the latter city gave its name to the final version, Havana (or Habana) Charter, in March 1948. The organization was never established, although it did address the impact of labor standards on competition. The draft of the charter stated that "the members recognize that unfair labor conditions, particularly in production for export, create difficulties in international trade and, accordingly, each member shall take whatever action may be feasible and appropriate to eliminate such conditions within its territory."
Twenty-three countries agreed to sign the GATT, which had already been finalized in Geneva on 30 October 1947. The Protocol of Provisional Application of the GATT was not signed as a separate document but as an attachment to the Final Act of the United Nations Conference on Trade and Employment, which was signed the same day. This provisional agreement allowed each of the participating countries to maintain escape clauses to protect its domestic producers. With the failure of the U.S. Congress to approve the ITO, there was new interest in GATT as a more permanent framework for tariff reductions. GATT represented the first successful postwar multilateral codification of the principles of free trade. The signatories pledged therein to conduct their trade on a multilateral basis without favor to particular countries, to reduce or abolish trade barriers and quotas, and to discuss tariff levels as well as exceptions at successive rounds of negotiations.
On 16 December 1947 President Harry Truman issued Proclamation 2761A, "Carrying Out General Agreements on Tariffs and Trade Concluded at Geneva, October 30, 1947," which provisionally made the agreement effective for the United States on 1 January 1948. A series of trade negotiations, or rounds, were convened during the postwar years to stimulate international trade through reduced tariff barriers. In 1949 the second round, negotiated in Annecy, France, achieved 5,000 tariff cuts. In 1950-1951 the third round, negotiated in Torquay, England, achieved 8,700 tariff cuts. In 1956 the fourth GATT round, in Geneva, achieved tariff cuts covering $2,500 million in trade. In 1960-1962 the fifth GATT round, negotiated in Geneva and named the Dillon Round for the chief U.S. trade negotiator, Under Secretary of State Douglas Dillon, achieved 4,400 tariff cuts. This last round marked the first time that the European Economic Community negotiated as an entity for individual member countries.
The Democratic administration of John F. Kennedy fostered a more active trade policy. Kennedy convinced Congress to pass the Trade Expansion Act (TEA) to stimulate American growth, reduce the American balance of payments deficit, and strengthen economic relations with other countries. On 11 October 1962 President Kennedy signed this legislation (Public Law No. 87-794), which authorized the president, under Section 235.2(b), to enter into trade agreements with other countries and established the post of special representative for trade negotiations in the executive office.
In the period immediately following the Trade Expansion and official U.S. entry into GATT, three additional GATT rounds ensued. The sixth GATT round (1963-1967) was named the Kennedy Round after President Kennedy. The seventh was named the Tokyo Round (1973-1979), and the eighth the Uruguay Round (1986-1994).
In April 1994 the Uruguay Round ended with 111 countries signing an agreement in Marrakesh, Morocco, to establish the World Trade Organization (WTO), an intergovernmental organization with a firmer legal foundation than its predecessor. Governing the WTO are a number of legal texts, most notably the GATT, the General Agreement on Trade in Services, and the agreement on Trade-Related Aspects of Intellectual Property Rights.
Clayton, William Lockhart (1880-1966): Clayton was a cotton merchant who served on the War Industries Board during World War I. In 1945 he headed the U.S. economic delegation to the Potsdam Conference. In 1947, the same year he helped negotiate GATT, he was instrumental in drafting the Marshall Plan. He was also instrumental in the creation of the International Trade Organization.
Dillon, Douglas (1909-2003): Dillon was a securities trader who was named U.S. ambassador to France in 1953 by President Eisenhower. In 1958 Dillon became undersecretary of state for economic affairs and was influential in creating the Inter-American Development Bank. In 1961 President Kennedy appointed him secretary of the Treasury. From 1960 to 1962 he was chief U.S. trade negotiator at the fifth GATT round, also known as the Dillon Round, in Geneva.
Herter, Christian Archibald (1895-1966): Herter was governor of Massachusetts and a U.S. congressman. His Herter Committee report initiated proposals for the Marshall Plan. Herter was U.S. secretary of state (1959-1961). In 1962, President Kennedy appointed Herter to be the first to fill the position of special U.S. representative for trade negotiations.
Hull, Cordell (1871-1955): Hull was a Tennessee congressman and U.S. senator who advocated low tariffs to stimulate world trade. In 1933 he was appointed secretary of state. In this role, he was responsible for the Reciprocal Trade Agreements (1934) that delegated to the U.S. president the power to enter into reciprocal agreements to lower tariffs.
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