The General Agreement on Tariffs and Trade (GATT) is the foundational agreement reached between many countries after World War II to reduce tariffs, quotas, and other barriers to trade. The agreement started with 23 nations signing in 1947 but had over 100 signatories by 1973. From its creation to its evolution into the World Trade Organization (WTO), GATT successfully reduced average tariffs among member countries from over 20% to around 5% or less.
Prior to GATT, trade barriers had been raised during the Great Depression with many countries having tariffs of over 40% during the 1930s. In order to counterbalance the harmful effects of these tariffs and rebuild economies after World War II, many nations participated in discussions to lower many barriers to trade. The result of the first rounds of discussions was the GATT which successfully lowered many barriers to trade. While meant as a multilateral treaty, GATT effectively became its own organization for managing trade issues among members due to the failed International Trade Organization (ITO). After many more rounds of negotiations, GATT increasingly allowed more beneficial global trade amongst member states until the Uruguay agreements created the WTO. The WTO became the new forum for enforcing and changing provisions of the GATT, with negotiations still occurring in the Doha round.
The GATT has many key aspects. One requires member states to apply tariffs in a non-discriminate way, meaning they should apply to all member states equally with limited exceptions. GATT also limits the ability of countries to place higher restrictions on goods from other member states than within their own country. Other major sources of friction for international trade such as quotas, dumping, and subsidies are very limited under GATT, reducing the ability of countries to be singled out by another country. For more information on GATT and the WTO, click here.
[Last updated in February of 2022 by the Wex Definitions Team]