The General Agreement on Tariffs and Trade is a multilateral trade agreement aimed at expanding international trade and the organization that oversees the agreement. The purpose of GATT organization, based in Geneva, is to provide a forum for discussion of world trade issues that allows for the disciplined resolution of trade disputes, based on the founding principles of the GATT which include nondiscrimination, transparency, an the most-favoured-nation (MFV) treatment. International negotiations known as Rounds are conducted to lower tariffs and other barriers to trade, and a consultative mechanism that may be invoked by governments seeking to protect their trade interests. The fundamental principles of the GATT are:
- Trade without discrimination. The first principal embodied in the famous most-favoured-nation clause is that trade must be conducted on the basis of non discrimination. No country is to give special trading advantages to another or to discriminate against it; all are on an equal basis and all share the benefits of any moves towards lower trader barriers.
- Protection through tariffs. Ensures that if protection to a domestic industry is given, it should be extended through the customs tariff and not through other commercial measures.
- Promotion fair competition. Concerns over dumping and subsidies are addressed by the Anti-Dumping Code which provides rules under which governments may respond to dumping in their domestic market by overseas competitors, and rules for the application of countervailing duties which can be imposed to negate the effects of export subsidies.
- Quantitative restrictions on imports. A basic clause of GATT is a general prohibition of quantitative restrictions (import quotas). The main exception to the general rules against these restrictions allows their use in balance of payments difficulties.
- Possible emergency actions. Waiver procedures allow a country to seek release from particular GATT obligations, when its economic or trade circumstances so warrant. The safeguards rule permit members under carefully defined circumstances to impose import restrictions or suspended tariff concessions on products that are being imported in such increased quantities and under such conditions that they cause serious injury to competing domestic producers.
- Regional trading arrangements. Regional trading groupings, as an exception to the general most-favoured-nations treatment are permitted in the form of a custom union or free trade area.
- Settling trade disputes. Consultation, conciliation, and dispute settlement are fundamental aspects of GATT´s work. Countries can petition GATT for a fair settlement of cases in which they feel the rights under the General Agreement are being withheld or compromise by other members.