List of Contents
- About the World Trade Organization (WTO)
- What is WTO’s Ministerial Conference?
- What are the key takeaways from the 12th Ministerial Conference of the WTO?
- What is the significance of the recent agreements?
- Why are the current agreements being criticized?
- What are other issues surrounding the WTO?
- What lies ahead?
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The 12th Ministerial Conference (MC) of the WTO concluded recently. The members of the World Trade Organization agreed to a series of deals the Conference. This includes temporary waivers on COVID-19 vaccines, a moratorium on e-commerce trade, food security and setting limits on harmful fishing subsidies. India played a significant role in developing consensus on these deals. However, certain long-standing issues in the WTO need to be addressed in order for it to regain its dwindling stature, especially after the growing focus towards regional agreements and groupings.
About the World Trade Organization (WTO)
The World Trade Organization is the only international organization that deals with the rules of trade between countries. The WTO officially commenced in 1995 under the Marrakesh Agreement signed by 124 nations, replacing the General Agreement on Tariffs and Trade (GATT). Currently, it has 164 members and 23 observer governments (like Iran, Iraq, Bhutan, Libya etc).
According to its rules, all decisions are taken through consensus and any member can exercise a veto.
Its aim is to promote free trade, which is done through trade agreements that are discussed and signed by the member states. The WTO also provides a forum for countries to negotiate trade rules and settle economic disputes between them.
What is WTO’s Ministerial Conference?
The Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the MC and they can take decisions on all matters covered under any multilateral trade agreements.
The 12th Ministerial Conference of the WTO was held in Geneva, Switzerland from 12-17 June. It was supposed to end on 15 June, but with intensifying negotiations, the conference was extended by two days.
What are the key takeaways from the 12th Ministerial Conference of the WTO?
Curtailing harmful fishing subsidies: The WTO passed a multilateral agreement that would curb ‘harmful’ subsidies on illegal, unreported and unregulated fishing for the next four years. Since 2001, member states have been negotiating the banning of subsidies that promote overfishing.
Exemption for Food Security: Members agreed to a binding decision to exempt food purchased by the UN’s World Food Programme (WFP) for humanitarian purposes, from any export restrictions. However, countries would be allowed to restrict food supplies to ensure domestic food security needs.
Moratorium on e-commerce transactions: Members agreed to continue the long-standing moratorium on custom duties on e-commerce transmissions. It will be continued until the subsequent Ministerial Conference or until March 31, 2024, depending on whichever comes first.
Temporary Waiver on Covid 19 vaccines: WTO members agreed to temporarily waive intellectual property patents on Covid-19 vaccines without the consent of the patent holder for 5 years.
What is the significance of the recent agreements?
First, the fisheries agreement is of immense significance as it is the first time that members concluded an agreement with environmental sustainability at its heart. It will also help in the protection of livelihoods of the 260 million people who depend directly or indirectly on marine fisheries. It is only the second multilateral agreement on global trade rules struck in its 27-year history.
Second, the exemption of WFP’s food from tariffs is vital for promoting global food security especially in light of the global food shortages and rising prices caused by the war between Ukraine and Russia.
Third, the temporary waiver will contribute to ongoing efforts to concentrate and diversify vaccine manufacturing capacity so that a crisis in one region does not leave others cut off.
Why are the current agreements being criticized?
First, critics believe that the fisheries agreement would only restrict and not eradicate subsidies on illegal fishing. After 20 years of delay, the WTO failed again to eliminate subsidized overfishing. This in turn allows the countries to continue to pillage the world’s oceans.
Second, India has asked the WTO to review the extension of the moratorium on custom duties on e-commerce transactions. Developing countries faced the brunt of the financial consequences of such a moratorium. From 2017-2020, developing countries lost a potential tariff revenue of around $50 billion on imports from only 49 digital products.
Third, the recent temporary waiver is a watered down version of the original proposal made by India and South Africa in 2020. They had wanted broader intellectual property waivers on vaccines, treatments and tests. The current waiver does not adequately waive IP on all essential COVID-19 medical tools and it does not apply to all countries.
What are other issues surrounding the WTO?
Burden for Poor countries: The WTO rules include many Non-trade subjects as well. The subjects like environment, labour standards, fossil fuel subsidies, plastic pollution and transparency in government procurement have been brought into the fold of the WTO. This is expected to raise costs for the poor and developing countries and impact the competitiveness of their goods. For instance, a poor country exporting cotton shirts must first meet high environmental standards at home. This will only raise costs and cut exports from poor countries.
Trade wars: The US administration imposed steep tariffs in January 2018 on China alleging IP violations. In December 2019 the US also blocked the appointment of new nominees to WTO’s appellate body. This has paralysed the WTO as a judge and enforcer of global trade rules.
Lack of consensus: The developed nations’ game plan is to put the old obligations on the back-burner and push the WTO to form rules on new areas like e-commerce. It is an area where the US firms have a clear edge. Most WTO member countries want them to first deliver on the agreed issues like reduction in agriculture subsidies.
What lies ahead?
First, India’s key demand to allow it to export food from its public stockholdings to other countries will reportedly be discussed in the next Ministerial Conference in 2023.
Second, Majority of negotiations are usually blocked by dissenting countries. Therefore, guidelines should spell out clear criteria for when a country may use its veto power. Veto usage needs to be weighed against the interests of all, and in light of the WTO’s mandate.
Third, an independent panel could play the role of arbiter, evaluating the competing claims and helping to overcome the political deadlock.
Fourth, New rules are required to keep pace with changes in the market and technology. Rules and disciplines on topics ranging from trade-distorting industrial subsidies to digital trade require updates.
Fifth, Plurilateral negotiations should be promoted as they allow like minded members come together to deliberate on a specific issue. This makes it easier and faster to negotiate than multilateral accord like passage of Trade Facilitation Agreement in 2013.
The WTO holds immense relevance considering the rapid pace of globalization and technological advancement across the world. It is still the most fundamental organization to protect the trade interest of small and developing countries against the diktat of the developed world. However, the deadlock on contentious issues like agriculture subsidies must be resolved urgently, for WTO to stay relevant. Else, the regional trade agreements will continue to take WTO’s place and this will prove detrimental to the interests of the developing countries.