Happy Birthday, GATT!

Doug Irwin celebrates the GATT’s 60th birthday (ungated version):

Sixty years ago this week (April 10, 1947) at the Palais des Nations in Geneva, Switzerland, representatives from 23 nations opened a conference that attracted little attention at the time, but had far-reaching consequences for the world economy. The conferees met to negotiate tariff reductions and finalize the text of a General Agreement on Tariffs and Trade (GATT)…

The origins of the GATT can be found in the economic disaster of the interwar period… Although the world economy recovered slowly from the depression, the spread of high tariffs, import quotas, discriminatory practices and foreign exchange restrictions meant that world trade remained stagnant and compartmentalized throughout the 1930s.

The tragic economic and political consequences of that “low dishonest decade” spurred some officials to think about a new economic framework. Marked by the bitter experience after World War I, Cordell Hull — FDR’s Secretary of State — came to believe that “unhampered trade dovetail[s] with peace; high tariffs, trade barriers and unfair economic competition, with war.”…

[In the 1947 GATT meetings, the] U.S. insisted that the most-favored nation (MFN) clause — ensuring nondiscrimination in trade — be the Article I cornerstone of the GATT because it wanted to prevent the spread of Imperial preferences that discriminated against its exports. Fearful of its postwar financial situation, Britain demanded large American tariff cuts in exchange for a reduction in preferences and wanted the freedom to impose quantitative restrictions on imports in case of balance of payments difficulties, something that became Article XII of the GATT…

Over its 60-year history, the GATT has had many shortcomings. Agricultural trade has largely eluded liberalization. The current spread of preferential trade arrangements… have reintroduced discriminatory trade practices…

Despite these shortcomings and difficulties, the GATT framework has survived as a durable code of conduct for commercial policy and dispute resolution…

The prosperity of the world economy over the past half century owes a great deal to the growth of world trade which, in turn, is partly the result of farsighted officials who created the GATT. They established a set of procedures giving stability to the trade-policy environment and thereby facilitating the rapid growth of world trade. With the long run in view, the original GATT conferees helped put the world economy on a sound foundation and thereby improved the livelihood of hundreds of millions of people around the world.

The task for statesmen today is to look beyond short-term political considerations, arising from the complaints of special interests that fear market competition and the parsing of subsidies, and bring the ongoing Doha Round to a successful conclusion. If immediate steps cannot be taken to liberalize trade, then the phasing in of reforms and the phasing out of subsidies over many years is perfectly consistent with the long-term objectives of the GATT. We should remind ourselves how much poorer the world would be today without the politically courageous decisions made by visionary diplomats meeting in Geneva 60 years ago this month.

This is the appropriate occasion to call for good trade policymaking, but I won’t hold my breath.