world trade organization
Following World War II, nations throughout the world, led by the United States and several other developed countries, sought to establish an open and nondiscriminatory trading system with the goal of raising the economic well-being
of all countries. Aware of the role of trade barriers in contributing to the economic depression in the 1930s, and the military aggression that rose following the depression, the countries that met to discuss the new trading system saw open trade
as essential for economic stability and peace. The intent of these negotiators was to establish an International Trade
Organization (ITO), which would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. The ITO was to be a United Nations
specialized agency, but the ITO treaty was not approved by the United States and a few other signatories and never went into effect. Instead, a provisional agreement on tariffs and trade rules called the General Agreement on Tariffs and Trade (GATT) was reached and went into effect in 1948. This provisional GATT became the principal set of rules governing international trade for the next 47 years. The GATT established trade principles that continue to be applied today.
Among the most important of these principles was nondiscrimination with regard to the treatment of trade in goods among countries. The most-favored-nation principle, Article I of the GATT, states that any advantage given by a contracting party to a product of another country must be extended unconditionally to a like product of all
other contracting parties.
A second rule of nondiscrimination is national treatment, the principle that imported and domestic goods should be treated equally. Although nondiscrimination is a cornerstone of the GATT, some exceptions are allowed. For example, customs unions, free-trade areas, and special treatment for developing countries are permitted. Another principle is the open and fair application of any trade barriers. Tariffs
were the most common and visible form of trade barrier at the time the GATT was
established. Tariffs are “bound,” or set at maximum levels, and not to increase above
the negotiated level. In general, quantitative restrictions such as quotas were not
allowed, since tariffs were much easier to identify and to eventually reduce.
The GATT also included a forum and process for countries to follow in trying
to resolve disputes. The dispute process allowed countries to consult with each other