From the outset the GATT system had a clear aim, namely the negotiation of binding commitments and of the reduction of tariffs and of tighter disciplines on non-tariff measures to reduce to a minimum the possibilities of "nullification" and "impairment". This course of action was pursued with success from 1947 through the Tokyo Round, which concluded in 1979. However, at the same time as the commitments and disciplines were being negotiated, tendencies serving to frustrate the benefits of these accomplishments emerged and threatened to reverse the whole process. By 1982, the international trading community recognized the "erosion" of the system, which has been manifested by a variety of symptoms. These include: (a) a neglect of the unconditional most-favoured-nation principle, the fundamental rule of GATT, in particular in application of discriminatory trading measures against developing countries; (b) the introduction (or resurrection) of concepts such as "market disruption" and "conditional" treatment to provide justification for such discrimination and for trade policies which conflict with basic principles of the multilateral system; (c) the decline of the relevance of the tariff as an instrument of trade policy; (d) an increased resort to non-tariff measures of flexible application, especially those designed to "harass" trade; (e) the proliferation of mechanisms for the management of the quantities, prices, and often the sources of imports; (f) an unravelling of previous commitments and undertakings, including those with respect to particular products or in favour of the developing countries; (g) general dissatisfaction with, and lack of commitment to, multilateral dispute settlement mechanisms; (h) an inability to translate multilateral rules and principles into national laws an regulations in such a way as to effectively guarantee their respect in the national context; (i) an emphasis on bilateral trade flows and a drift away from multilateral reciprocity. Developing countries have been particularly penalized by these tendencies.
Most governments are quick to demonstrate how the trading system works primarily to the advantage of others. The net result, however, is an ambiance of indiscipline, which has impeded the ability of the international community to address effectively the recognized problems confronting the trading system, created frustrations, exacerbated tensions in international trade relations and led to "pragmatic" solutions or retaliation.
In addition to this breakdown of trade discipline, trade policy has increasingly been affected by financial disturbances, in particular, by sharp swings in real effective exchange rates and interruptions of capital flows to developing countries. As a result of their severe external payments problems, the trade policies of developing countries are now being determined by external pressures arising from adverse movements in the terms of trade and changing exchange rates, interest rates, foreign investment patterns and capital flows, rather than by national development objectives.