A Brief History of the GATT
Gerard Greenfield
In 1947, the governments of 23 countries signed an agreement on the international trade of goods between their countries. This agreement was based on the ideology of what they called 'free trade” or trade liberalisation. The governments that signed the agreement promised to liberalise trade by reducing the protection they provided to local manufacturers in their own country. This protection took the form of taxes on imports (tariffs), controls on the quantity of imports (quotas), and government subsidies and financial assistance. It was claimed that this government protection was inefficient and unfair, creating barriers that blocked 'free trade'. Under this new agreement, governments were committed to removing these barriers.” This agreement was called the General Agreement on Tariffs and Trade (GATT).
The GATT was not one agreement, but several agreements under one umbrella agreement. Over the five decades since 1947, new agreements covering other goods were included under this umbrella. In the 1970s, the GATT was extended to include services. And in the 1980s and early 1990s, GATT agreements on agriculture and intellectual property were signed by governments, despite strong opposition by peasant farmers’ organisations and mass-based rural movements. Eventually the GATT included more than 200 agreements and rules on international trade. At the same time, many more governments signed the GATT, so that the number of countries covered by the GATT agreements and rules increased from 23 to 127. This means that the working people of another 100 countries were forced to bear the costs of 'free trade” under the GATT.
'Free Trade' Under the GATT
The reason that there was popular protest against new agreements under the GATT, like the agreement on agriculture, was that the 'free trade” policies forced on countries by the GATT agreements took away government subsidies and protection that was necessary for the livelihood and survival of the mass of working people. In many countries working people fought long, hard struggles to get government to provide protection, including subsidies and financial assistance, because they could not compete with the power and wealth of large corporations. But now this protection was being taken away because it is a barrier” to 'free trade'.
The very low wages and strict labour control imposed by large corporations and their use of new technology means that they can make their products much more cheaply than traditional local producers. And without government protection, local producers cannot compete. Many things which people used to buy locally now can only be bought from overseas corporations or what are called transnational corporations (TNCs). Many traditional ways of living were taken over by the mass market” products of these TNCs. For example, breast-feeding was taken over by powdered milk produced by the big TNCs like Nestle and Danone, even though powdered milk is very dangerous for babies’ health. Many kinds of traditional food has been replaced by McDonald's, because it is cheaper and more attractive, even though McDonald's food is bad for your health and is made under very bad working conditions with low wages.
The aggressive strategies of these TNCs often destroys traditional industries as well as destroying the local environment and natural resources. Millions of workers in traditional craft industries lost their jobs and millions of small-scale farmers and peasant-farmers were forced off their land as a result. Any government measures to protect traditional local industries or to limit the power and control of overseas corporations were illegal under the GATT.
After the trade in services was included under the GATT, there was more pressure for privatisation of public services. Public services provided at subsidised prices or for free by the government were privatised to allow 'free trade” in services. This meant that large corporations, especially TNCs, could take over public services and charge higher prices, providing services mainly to the wealthy and to other corporations. This then changed from a public service to a profit service. As a result, working people had to pay more for these services or were excluded from access to these services altogether.
TNCs and the GATT
It is clear that large private corporations, especially TNCs, benefitted greatly from the GATT's 'free trade” regime. But we also know that the GATT agreements were written and signed by governments, not by TNCs. So how did TNCs influence this?
Even though private corporations were not members of the GATT, they had many direct and indirect channels for making sure that their interests were served by the GATT agreements and rules. The expansion of GATT's reach into new products and services was pushed by transnational corporations (TNCs) which wanted to open up all industries and sectors so that they could use their wealth and power to dominate these industries. They also wanted to open up more countries to TNC control by getting more governments to sign the GATT.
From the beginning GATT negotiations were always strongly influenced by large corporations which pushed their interests through government representatives from their home country, as well as buying off government representatives from the countries where they invested. Also, there were many committees and councils giving advice to the governments involved in the GATT, and these committees were dominated by representatives from big corporations, especially TNCs. In fact, many of the GATT officials who wrote the agreements and rules were former business executives who worked for TNCs or were their paid consultants. On the other hand, trade unions, social movement groups and popular democratic organisations could have no say in the GATT negotiations.
TNCs played an even stronger role in the GATT negotiations from 1986 to 1994. That is why key industries where TNCs wanted more power to take control and profit were opened up to 'free trade”, including agriculture and intellectual property. As government protection and regulation of these industries was reduced, TNCs could grab a larger share of the market and take control of local resources.
But this was not enough. The capitalist heads of TNCs wanted the 'free trade” rules under GATT to be imposed more strictly and for changes to take place more quickly. They also wanted the GATT to have more power to punish those countries failing to follow the rules of 'free trade.' In support of the TNCs from their own countries, the governments of the US, EU, Japan and other industrialized countries complained that the authority of the GATT was too weak and that negotiations involved too much bargaining and compromise with those governments which were responding to the pressure of popular democratic forces from below.
The heads of TNCs and government leaders believed that to push the 'free trade' agenda more strongly it was necessary to create an international agency with more power than the office of the GATT. Most important of all, this new agency needed the power to punish and discipline member-countries which failed to follow 'free trade” rules and allow TNCs to exercise unlimited power to exploit and make profits. In 1994, they succeeded in getting governments to agree to form this new agency - the World Trade Organisation (WTO).
The WTO
In 1995, the GATT was replaced by the World Trade Organisation (WTO). The WTO was quick to meet the demands of TNCs and the governments of the US, Europe and Japan for faster trade liberalisation. In the last 4 years, the 'free trade” agenda has been imposed more forcefully on working people in more countries throughout the world and has affected more aspects of our lives. Millions of more jobs have been lost because of the destruction of local industries and services, privatisation, and the destructive competition” imposed by TNCs. And new areas like health and education are now being opened up to the control of TNCs and their socially destructive drive for profit.
As an organisation of governments, the WTO currently has 135 countries as its members. The governments of another 30 countries, including China, have applied to join the WTO. Of course, the members of the WTO do not have equal power. In the last 4 years, the WTO's decisions on trade disputes has benefitted TNCs from the US and EU most of all. And in setting new WTO rules and policies, the governments of the US and EU have much more power in the WTO than other countries - especially the poorer, developing countries.
It is also important to recognise that for countries to become members of the WTO, they must introduce 'free market” policies that cut government protection, reduce government spending and welfare, and abolish subsidies. This is necessary to qualify as a 'free trade” country allowed to enter the WTO. What this means is that the biggest economic and social costs are usually forced on working people when a government is trying to meet the standards of the WTO so that it can join. Once a government joins, the 'free trade' and 'free market' policies are pushed more strongly and the social costs for working people rise even higher.
The WTO acts as a policeman or globo-cop in the world economy, checking to make sure that governments are not introducing policies or laws that break 'free trade” rules. When it catches governments who break these rules it either takes them to be judged or threatens them with punishment. The punishment is a ban or sanction on that country's exports. And as a global policeman the WTO also protects the private property and profits of TNCs, and makes sure that it is a safe environment for capitalists to make profit and become wealthier.
China - The government of the Republic of China was one of the original 23 governments to sign the GATT in 1947. When the People's Republic of China was founded on the mainland in 1949, the KMT government of Taiwan notified the UN of its withdrawal from the GATT in 1950. This took China out of the GATT, even though the PRC government claims that action was illegal and invalid.
In 1986, the PRC government applied again to continue its membership in the GATT. To meet the 'free trade” requirements of the GATT, the Chinese government introduced many economic reforms, including massive tariff and subsidy cuts and further opening up to foreign investment. Although Chinese government representatives participated in GATT negotiations in 1986 to 1994, China was still not a member of GATT when the WTO was formed in 1995. China has applied to become a member of the WTO.
Taiwan - After the Taiwanese government withdrew from the GATT in 1950, it was not able to become a member again. As such it is not a member of the GATT agreements. However, in collusion with the US government, the government of Taiwan has followed the 'free trade” rules of the GATT agreements unofficially. After 1995, the Taiwanese government applied to become a member of the WTO and is introducing many economic liberalisation policies in order to meet the requirements of the WTO.
Hong Kong - As a British colony, Hong Kong was automatically included in the GATT when the UK signed the agreement in 1947. In 1986, the UK government changed Hong Kong's status to become a full member of the GATT as an independent customs territory. So Hong Kong became a full member of the GATT agreements in 1986, and became a member of the WTO when it was formed in 1995. The 1997 reunification with China did not change Hong Kong's membership to the WTO.