|Demand of the question
Introduction. Contextual Introduction.
Body. Problems faced by WTO. And reforms needed.
Conclusion. Way forward.
The World Trade Organization (WTO) is the principal forum for setting the rules of international trade. In its two decades, it has helped reduce barriers to trade in both goods and services and created a dispute resolution system that has reduced the threat of trade wars. However, the institution is under considerable pressure. The recent trade wars, unilateralism and protectionism evoke the need of reform in the WTO if it has to survive in the present context.
Problems facing the WTO:
- Unilateralism and protectionism: For years, the multilateral system for the settlement of trade dispute has been under intense scrutiny and constant criticism. The U.S. has systematically blocked the appointment of new Appellate Body members and de facto impeded the work of the WTO appeal mechanism. This unilateralism has raised questions about the authenticity of WTO.
- Disputes settlement: Dispute settlement cases continue to be filed for the time being and are being litigated. A dispute over over trade issues persists and has not reached a consensus. This has led to continuous violation of WTO principles.
- Trade distortion: Many WTO members bear responsibility for the use of trade-distorting domestic subsidies. Agricultural and industrial subsidies have caused blockages in the system and prompted protectionist reactions in a number of WTO members. Blockage and deadlock in the Appellate Body stage of the WTO dispute settlement system triggered the present crisis.
- Tariff manipulation: The US and the EU have not been able to counter China’s tariff manipulation. They are also bound by the commitments made under the WTO rules so they cannot raise import duties without violating WTO rules. But they do not want to meet the WTO obligations such as reducing agriculture subsidies.
- 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 e-commerce, 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.
The key areas of reforms are:
- Reforming the voting process: 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.
- Independent panel as arbiter: An independent panel could play the role of arbiter, evaluating the competing claims and helping to overcome the political deadlock.
- FramingNew rules: GATT/WTO rules in a number of areas are outdated. 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.
- Appointment process: The appointment process to dispute settlement body should be made independent of political control.
- Plurilateral negotiations: 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.
- Dispute settlement reform: This includes expanding the Appellate Body panel from seven to nine judges, redefining membership of the Appellate Body from part-time to full-time, and allocating more resources to the Appellate Body Secretariat.
- Increasing transparency: WTO members should proactively disclose their subsidies to develop trust and transparency among WTO members.
The WTO is at a crossroads. Not only are the multilateral trade negotiations stuck, but overall rule-making has made little progress while alternative trade pacts, not least the mega-regional arrangements, have clearly challenged the position of trade multilateralism. WTO need to modify its vision in accordance with present challenges.