To ensure that the objectives of GATT were achieved, the members laid down some principles that were to be followed by all members and be guidance in all their activities. The principles formed the basis for the GATT agreements. Hence, it was not right for any member country to come up with policies that were contrary to the agreed principles. The Most Favoured Nation (MFN) is one major principle that was to be observed by the member countries. This was the first principle that was passed to guide trade. This principle says that no member country should discriminate another member in trade.
If a member gives a favour to another, (for instance, lowering the customs duty), then this has to be applied to all other members. Furthermore, in this principle, it means that goods or services from one member country is treated no differently from goods or services from another country. In addition, when the goods of a foreign country are in anothers domestic market, they have to be treated no less than the other commodities (Leonard, 2006). The second principle calls for the member countries to protect their domestic industry by applying customs duty, instead of using trade barriers.
In essence, the principle called for the member countries to be transparent in carrying out their trading activities. Thirdly, the reciprocity principle called for the member countries to consult one another on matters that concerned trade between them. The principle required that as one member country called for the other to reduce her tariffs; she should as well reduce hers. This principled was thus aimed at giving mutual benefit to the trading partners. The fourth major principle dealt with improving new trade tariffs.
The members agreed that by imposing a new tariff at one point, it needed to maintain the balance. These principles thus provided a framework in which the member countries were to negotiate any trading activities (Faye, 1996). GATT principles emphasised on membership trade as opposed to individualistic trade. Taking the case of non discrimination trading, it meant that only a member country could not be discriminated, but non members could not enjoy such privileges. This meant that competition between GATT members and the non members could not be a healthy competition.
However, even though the principle stipulated for non discrimination between members, it was not possible to ensure that this was upheld. This was brought about by the endowment and the technology factor that existed between the member states, causing differences members have in the competition position. If there are no differences in the competitive environment, there can not be any economic welfare benefit that will be found as a result of international trade (Dowlah, 2004). GATT was formed on the principle of reciprocity. This principle has contributed to having negative impact on liberalising trade.
If a nation combines the Most Favoured Nations principle and reciprocity, it can force the government to make sure that importation tariffs are lowered further, which again will be a very big disadvantage to the non member countries. When a member country lobbies for the lowering of importation tariffs, it will generally transform to other members reducing their tariffs as a way of reciprocating. This has led to a fight between the exporters advocating for liberalised trade, while the importers fighting to protect their firms.
Non GATT members who were interested in liberalising their markets on a non reciprocal form have found it very hard as the members are never willing to liberalise their markets on a non reciprocal manner. This implies that the non GATT members find it very hard to trade and compete on the same level with the GATT members. For the members to liberalise their markets, they have first to see what benefit they are going to get from the others. Off course this goes against the free trade principle, since no member will be willing to trade with a country that is not going to give them any benefit in the trading pattern.
Therefore, for any country to trade with another, there has to be tangible benefit that has to be proven between the nations. This is generally very difficult to be found between a member and a non member, as only the members will benefit from the agreements. Through reciprocity principle, a nation will ensure that it benefits from a trade concession by giving out another trade concession. Therefore, if a nation does not have any given concession, then it will be impossible for it to trade with others. The effect of this is that it might inhibit further liberalisation of the markets.
This is due to the fact that individual members might be forced to carry out liberalisation of trade, without doing the same to the GATT members. In essence, this action will lead to having trade concessions that GATT members do not have to necessarily match (Brett, 2001). The GATT agreements have contributed to members harming others, especially the new members. Looking at the welfare gain that is supposed to be generated from the free trade, it has to be reflected to the whole members (Cannon & Bland, 1993). However, on distributive, it occurs on individual level.
This effect can be offset by a shift that can occur in the free trade. The problem is that this is a political decision that can affect how the free trade will occur. In more powerful nations, the governments have been forced to take up trade policies that are detrimental to the weak nations (Narlikar, 2003). There are many other problems that have been facing GATT members but being swept under the rug. Some of these problems have been advantageous to one nation while being disadvantageous to another. For instance, this was witnessed when the Japanese cars entered the American markets.
Japan was faced with invisible pressure that it had to voluntarily limit the number of vehicles it was exporting to the United States (http://www. busmgt. ulster. ac. uk/modules/eco811m1/Group%201. doc. ). This is a clear evidence of how GATT members and those who supported these ideologies were bending matters so as to suit their own needs. Some powerful members like the European Union have also been taking the interpretation of GATT principles at liberty and no action has been taken against them. Many of the conflicts that have occurred in the trading patterns within GATT have been mostly solved in a very mystifying manner.
It has mostly been in favor of the powerful states leaving the less powerful and the new members at a loss. In coming up with the non trade barriers, there were many other challenges that members faced in the implementation. For instance, France had a requirement that all VCRs that were being imported into the country had to undergo an inspection and pass it before being allowed into the country. The major problem with the policy is that there was a big congestion since the country depended on a single inspector (http://www. busmgt. ulster. ac. uk/modules/eco811m1/Group%201. doc. ).
It was also difficult to know if some non trade barriers were genuinely motivated by policies of other partners or it was just a matter of interfering with trade. This can be explained by the instance in which the US limited the exportation of tuna as a way of protecting the dolphins. On the other hand, Mexico was taking a large number of the tuna catches into the American markets disregarding how the mode in which they were caught. After some time, Mexico was blamed on how the number of dolphins had declined. This was challenged but GATT did not do anything on the matter, hence benefiting a few nations (Collins, & Bosworth, 1994).
The GATT rules were so much concerned with protecting the industrialized countries leaving the poor countries that depended on agriculture out. Hence, it led to the feeling that GATT was out to protect only the rich. GATT principles seemed to be more biased in protecting the rich nations all along leaving the poor nations out. In trying to resolve the matter, the developed countries tried to be flexible with their rules, but it still did not deter the developing countries from agitating for more GATT rights (Dowlah, 2004).
As earlier argued, most of the GATT principles were political, hence did not put in effect such issues as the environment (White, 1998). Taking the case in which the GATT principle calls for the member countries to treat imported goods from a member country in the same manner as locally produced goods, it was later changed and the decision only based on finished commodities being sold to the public. In this case, if the goods that had been imported were the same as the domestically produced goods, then it was not necessary to consider the mode at which the commodities were produced (Kahler, 1995).
This implies that it is not possible to impose environmental issues on the products being manufactured by the member countries into others that are environmentally vulnerable. This meant that countries that disallowed the importation of especially food products that had been produced by the use of a lot of pesticides and other chemicals to be at the risk of getting its markets flooded with such commodities. This also affected small and medium sized farmers. The farmers who had diversified their productions could not be able to compete at the same level with those dealing with one type of crops at a large scale (Wold, 1996).
It is thus true to argue that GATT played a significant role in developing trade and liberalizing the markets. It created a co-operation between the markets that was initially not there (Barons, 1991). However, the system outlived its purpose by benefiting few nations at the expense of others; hence the Uruguay roundtable that led to the formation of the world trade organization was timely.
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