General Agreement on Tariffs and Trade (GATT) brought about an orderly development of the International trade. It established a forum for continuing consultations. It brought to the conference table even diplomatic rupture. GATT could achieve considerable trade liberalization. Yet certain defects of GATT were noticeable. They are listed below.
Disadvantages or Limitations of GATT
1. Only a provisional agreement
Basically GATT is a provisional agreement. GATT system allowed existing domestic legislation to continue even if it violated a GATT agreement. GATT prescribed an international code of conduct in the sphere of trade. But there was no enforcement authority to ensure the compliance of GATT regulations by contracting parties. As a result, the impact of GATT on the orderly development of international trade was less.
2. Paultry gains to less developed countries
Less developed countries could get only little benefits from GATT. Trade liberalization was confined mostly to the developed countries. Manufactured products of interest to developed countries (textiles, clothing, footwear, etc) have been subject to increasing non-tariff barriers.
Developed countries enjoyed a more liberalized trading environment, Growing non-tariff barriers were severely affecting the exports of developing countries. Developed countries were increasing the protectionism while developing countries were liberalizing. Less developed countries could not bargain effectively and they could not reap much benefits from GATT.
3. No benefits in Commodity-wise negotiation
GATT followed the principle of commodity-based negotiations. Developing countries, mainly exporting primary products could not effectively bargain with developed countries. So, commodity-wise negotiations adversely affected the interest of developing countries. Developed countries could benefit much owing to their better bargaining power. Moreover, commodity based negotiations only resulted in prolonged deliberations at the various rounds of GATT negotiations.
4. Formation of Regional Trading Blocks undermines GATT
Formation of free trade areas and customs unions was allowed under the Article XXIV of the GATT. The emergence of the strong regional trading blocks such as European Union, North American Free Trade Association, Association of South East Asian Nations. etc., undermined the basic principle of GATT.
5. Lack of legal status
GATT had neither a legal status nor a global status. Basically, GATT is an agreement with a set of rules and procedures of a selective nature. So, GATT was less powerful. The dispute settlement system was slow and less efficient. Its ruling could be easily blocked.
6. Diverse membership
The member countries of the GATT have diverse political and economic interests. Arriving at consensus was, therefore, difficult. Formulation of general rules was fraught with difficulties owing to the diverse nature of membership.