General Agreement on Tariffs and Trade
Toward the end of World War II, representatives of the US and its Allied Forces endeavored to work out the arrangements for a new world order in the post war era. As a result of these negotiations, after World War II the US and its Allies planned to establish three important international institutions to liberalize trade and payment.
1. Three institutions + UN
I. International Monetary Fund (IMF) was established to facilitate international payments.
II. International Bank for Reconstruction and Development. To encourage free flow of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established.
III. To facilitate free trade, International Trade Organization (ITO) was to be born.
IV. As a political complement to these institutions, United Nations was also established in 1945 to replace the League of Nations.
GATT was the result of an international conference held at Geneva in 1947 to consider a draft charter for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to commitments to regulate 45,000 tariff rates.
Technically, GATT was viewed as an agreement under the provisions of US Reciprocal Trade Act of 1934, and hence did not require approval of Congress. So GATT began its provisional existence on January 1, 1948, when 23 contracting parties signed the agreement.
Major Provisions of GATT
Tariff
(a) GATT obligates each country to accord non-discriminative, most favored nation (MFN) treatment to all other contracting parties with respect to tariffs.
(b) MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to tariffs or quotas. MFN treatment means that no other countries with some exceptions receive better treatment or lower tariffs.
Quantitative Restrictions
GATT in general prohibits the use of quantitative restrictions on imports and exports.
Exceptions
(a) Agriculture - when government needs to remove surplus of agricultural and fisheries products.
(b) Balance of payments - to safeguard balance of payments. If a country's foreign exchange reserve is low.
(c) Developing countries - LDCs may use import quotas to encourage infant industries.
(d) National Security- Strategic controls on certain exports, patents, copyrights, Public Morals
Other provisions
Provisions to eliminate concealed protection such as customs valuation. For example, American Selling Price valuation. By ASP, an ad valorem tariff is imposed on the domestic price. Procedural matters: each member is entitled to one vote, decisions are made by majority vote. 2/3 majority is required to waive obligations. Settlements of disputes.
Achievements and Problems of GATT/WTO
GATT has enjoyed a membership of over 100 countries and generated about 85-90% of world trade.
(a) Trade liberalization in industrial products (Kennedy Round)
(b) Adopted codes on NTBs (Tokyo Round)
(c) No world wars since 1948 (Increased trade promotes world peace)
(d) Replaced by WTO on January 1, 1995.
Difference between GATT and WTO
(a) GATT was a provisional agreement by contracting parties with no legal enforcement power. WTO is a binding permanent agreement by members.
(b) GATT only included trade in goods. WTO additionally includes trade in services, international investments and intellectual property rights.
(c) GATT has no provisions to settle trade disputes. WTO sets up a dispute settlement body and disputes are quickly resolved.
WORKING ON THE TEXT
Ex.1. SKIMMING:
a.Read the headline and the first sentence of each paragraph of the text. Pair up to discuss the topic of the article.
b. Read the first paragraph and the last paragraph of the text. Then work in pairs to discuss the contents of the piece.
c. Read the text. Get into pairs to discuss the contents of the piece.
Ex.2. SCANNING:
a. While scanning the text find the answers for content-specific questions given by the teacher.
b.While scanning the text pick out the sentences containing the key words given by the teacher.
Ex.3. READING: Read and translate the text “General Agreement on Tariffs and Trade”.
Ex.4. TEXT QUESTIONS: Look back at the text and write down some questions you would like to ask the class about the text.
- Share your questions with other classmates / groups.
- Ask your partner / group your questions.
Ex.5. GATT DISCUSSION:What is GATT? Talk about this with your partner(s). Rate each item from 10 (This is essential) to 1 (How ridiculous). Change partners and share your ideas. Use the words below.
| _____ ad valorem tariff _____ international institutions _____ tariff rates _____ to safeguard | _____ non-discriminative _____ to facilitate _____ tariff rates _____ import quotas |
Ex.6. WRITING ON GATT PROVISIONS:Spend one minute writing down all of the different words you associate with the word ‘provisions’. Share your words with your partner(s) and talk about them. Together, put the words into different categories.
Ex.7. QUICK DEBATE:Students A GATT in general prohibits the use of quantitative restrictions on imports and exports; Students B are strongly against this. Change partners again and talk about your roles and conversations.
Ex.8. TRUE / FALSE: Guess if a-h below are true (T) or false (F):
| a. | As a result of these negotiations, after World War II the US and its Allies planned to establish four important international institutions to liberalize trade and payment. | T / F |
| b. | WTO is a binding permanent agreement by members. | T / F |
| c. | GATT only included trade in goods. | T / F |
| d. | GATT has enjoyed a membership of over 1000 countries and generated about 85-90% of world trade. | T / F |
| e. | GATT was the result of an international conference held at Moscow in 1949 to consider a draft charter for the International Trade Organization (ITO). | T / F |
| f. | GATT had a lot of provisions to settle trade disputes. | T / F |
| g. | WTO sets up a dispute settlement body and disputes are quickly resolved. | T / F |
| h. | International Monetary Fund (IMF) was established to facilitate international payments | T / F |
Ex.9. SYNONYM MATCH: Match the following synonyms from the article:
| 1. | to safeguard | a. | to agree |
| to accord | b. | clauses | |
| 3. | restrictions | c. | lack |
| 4. | provisions | d. | allowance |
| 5. | surplus | e. | settle |
| 6. | quota | f. | to give the right |
| 7. | to settle | g. | to cut out |
| 8. | to resolve | h. | to regulate |
| 9. | to entitle | i. | limitations |
| 10. | to eliminate | j. | to defend |
Ex.10. PHRASE MATCH: Match the following phrases from the article (sometimes more than one combination is possible):
| 1. | Toward the end of World War II, representatives of the US and its Allied Forces … | a. | patents, copyrights, Public Morals |
| GATT was the result of an international conference held at Geneva in … | b. | LDCs may use import quotas to encourage infant industries. | |
| 3. | GATT was a provisional agreement … | c. | concealed protection such as customs valuation. |
| 4. | National Security- Strategic controls on certain exports … | d. | body and disputes are quickly resolved. |
| 5. | GATT in general prohibits … | e. | that led to commitments to regulate 45,000 tariff rates. |
| 6. | WTO sets up a dispute settlement body … | f. | binding permanent agreement by members. |
| 7. | Provisions to eliminate … | g. | use of quantitative restrictions on imports and exports. |
| 8. | WTO is … | h. | by contracting parties with no legal enforcement power. |
| 9. | Developing countries - … | i. | 1947 to consider a draft charter for the International Trade Organization (ITO). |
| 10. | The US initiated negotiations with 22 other countries … | j. | endeavored to work out the arrangements for a new world order in the post war era. |
Ex.11.GAP FILL: Fill in the gaps in the text using the words on the right.
| Toward the end of World War II, representatives of the US and its Allied Forces endeavored to work out the arrangements for a new ___ ___ in the post war era. As a result of these negotiations, after World War II the US and its Allies planned __ _____ three important international institutions __ _____ trade and payment. 1.Three institutions + UN I. International _____ ___ (IMF) was established to facilitate international payments. II. International Bank for _____ and Development. To encourage free ____ of private capital, International Bank for Reconstruction and Development (IBRD, now the World Bank) was also established. III. To _____ free trade, International Trade Organization (ITO) was to be born. IV. As a political ___ to these institutions, United Nations was also established in 1945 _____ the League of Nations. GATT was the result of an international _____ held at Geneva in 1947 to consider a _____ _____ for the International Trade Organization (ITO). The US initiated negotiations with 22 other countries that led to ____ to regulate 45,000 tariff rates. Technically, GATT was viewed as an agreement under the ____ of US Reciprocal Trade Act of 1934, and hence did not require approval of Congress. So GATT began its provisional existence on January 1, 1948, when 23 ___ parties signed the agreement. 2. Major Provisions of GATT 1. Tariff (a) GATT obligates each country to accord non-discriminative, most favored nation (MFN) treatment to all other contracting parties with respect to tariffs. (b) MFN treatment does not mean free trade or national treatment. Imports from contracting parties are subject to ___ or quotas. MFN treatment means that no other countries with some _____ receive better treatment or lower tariffs. 2. Quantitative Restrictions GATT in general prohibits the use of _____ restrictions on imports and exports. Exceptions (a) Agriculture - when government needs to ____ surplus of agricultural and fisheries products. (b) Balance of payments - to safeguard ___ of payments. If a country's foreign exchange _____ is low. (c) Developing countries - LDCs may use import _____ to encourage infant industries. (d) National Security- Strategic controls on certain exports, patents, _____ , Public Morals. 3. Other provisions Provisions to _____ concealed protection such as customs valuation. For example, American Selling Price _____ . By ASP, an __ _____ tariff is imposed on the domestic price. Procedural matters: each member is entitled to one vote, decisions are made by _____ vote. 2/3 majority is required to waive obligations. Settlements of disputes. 4. Achievements and Problems of GATT/WTO GATT has enjoyed a _____ of over 100 countries and generated about 85-90% of world trade. (a) Trade _____ in industrial products (Kennedy Round) (b) Adopted codes on NTBs (Tokyo Round) (c) No world wars since 1948 (Increased trade promotes world peace) (d) Replaced by WTO on January 1, 1995. 5. Difference between GATT and WTO (a) GATT was a provisional agreement by contracting parties with no legal _____ power. WTO is a _____ permanent agreement by members. (b) GATT only included trade in goods. WTO additionally includes trade in services, international _____ and intellectual property rights. (c) GATT has no provisions to settle trade _____ . WTO sets up a dispute settlement _____ and disputes are quickly resolved. | contracting draft charter facilitate flow Reconstruction Monetary Fund to liberalize body world order to establish complement to replace conference commitments provisions tariffs exceptions disputes quantitative remove balance reserve quotas copyrights eliminate valuation binding ad valorem majority investments membership liberalization enforcement |
Ex.12. WORD SEARCH: Look in your dictionaries / computer to find collocations, other meanings, information, synonyms … for the words ‘liberalization’and ‘valuation’.
| liberalization | valuation |
- Share your findings with your partners.
- Make questions using the words you found.
- Ask your partner / group your questions.
Ex.13. CHAT: In pairs / groups, decide which of these expressions and words from the article are most interesting and which are boring.
international institutions, to liberalize, to facilitate, to encourage, free flow of private capital, political complement, to replace, international conference, draft charter, commitments to regulate, tariff rates, provisions, provisional existence, contracting parties, to accord, non-discriminative, free trade, quantitative restrictions, to remove surplus, to safeguard, import quotas, to encourage, infant industries, patents, copyrights, Public Morals, ad valorem tariff, majority vote, adopted codes, provisional agreement, international investments, intellectual property rights, to settle trade disputes, dispute settlement body.
Ex.14. VOCABULARY: Circle the words you do not understand. In groups, pool unknown words and use dictionaries to find their meanings.
Ex.15. TEST EACH OTHER: Look at the words below. With your partner, try to recall how they were used in the text:
| draft charter facilitate flow to liberalize body world order to establish complement to replace conference | commitments provisions tariffs exceptions disputes quantitative remove balance reserve quotas |
Ex.16.WRITING:
Write about the General Agreement on Tariffs and Trade. Correct your partner’s paper.
Ex.17. SPEAKING:Speak on the topic “General Agreement on Tariffs and Trade”
GRAMMAR REVISION
Ex.1. PHRASAL VERBS:Use a main verb from the first box and a preposition from the second box to create the answers below.
e.g - Go and _________ (him)! It's nearly 9am!!
Answer: Go and wake him up! It's nearly 9am!!
| Back | Change | Feel | Hold | Do |
| Look | Play | Set | Throw | Knock |
| On | After | Down | Back |
| Over | In | Off | Up |
1. Even though he was proved wrong, he absolutely refused to _____ .
2. There were two pilots on the flight to Australia and they _____ after half the flight was completed.
3. Can you _______ my cat for a few days while I am away on business?
4. The baby has been quite ill this week and yesterday, after dinner, _____ her dinner.
5. If the children _____ while we are out Kathy, put them to bed and don't let them watch TV in their rooms, OK?
6. I have a splitting headache and I certainly don't _____ to going to watch a concert.
7. There was a stupid man in the post office asking about the history of stamps. He _____ the line of people for fifteen minutes!
8. We both left university the same year and _____ our own business called "Fluffy Fings".
9. Don't get him worried about money. If I were you, I'd _____ the importance of getting the loan or he will panic.
10. The government should _____ their fine words about foreign aid with real increases in the money they give to the Third World.
WORKING ON THE ARTICLE
Airport security