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The Problem at the WTO

Context

WTO is facing existential crisis during a time when developed economies have adopted protectionist attitude

Evolution of WTO

1944: Bretton Woods’s conference wanted to make ITO (International Trade Org.) but USA did not ratify. Thus, GATT was born as a stopgap arrangement

1947: GATT (General Agreement on Trade & Tariffs) established aimed to reduce barriers to international trade

1986: Uruguay Round of Talks; Service & Intellectual Property rights related topics included in the debate

1994: Marrakesh treaty under Uruguay round of talks at Morocco

1995: WTO was established. India was a founding member

WTO Buenos Aires meet

The World Trade Organization’s 11th Ministerial Conference held at Buenos Aires ended without a Ministerial Declaration. Members failed to reach consensus on already existing major issues like public stockholding of food items and new issues like ecommerce

Major takeaways

  1. Public stockholding of food items
  • There was no outcome on public stockholding for food security purposes or on other agriculture issues. As a result, India’s food security programmes and its current public distribution system will not be impacted.
  1. Special Safeguard mechanism
  • There was no outcome on Special Safeguard Mechanism (SSM) which allowed developing countries to Increase tariff against agricultural imports that are causing injuries to domestic farmers.
  1. Fisheries
  • Member nation pushed commitment to secure a deal on fisheries subsidies for prohibiting illegal, unreported and unregulated (IUU) fishing to the end of 2019. this decision was taken after a deadlock of fifteen years
  • This give India more time to ensure that there are adequate safeguards in place to protect artisanal (Traditional) fishers.
  1. Singapore issues
  • The ‘Singapore issues’ – investment, competition policy, government procurement and trade facilitation – are among the most contentious issues to have been discussed in WTO
  • No decision is being taken over Singapore issue
  1. No to new issues
  • The new issues like ecommerce, Investment facilitation, MSME and gender issuesare pushed by the developed world to broaden the trade agenda. But these issues were opposed by developing countries
  • Developing countries are apprehensive that this may dilute the existing agenda such as agriculture and development
  • However, India also recognize the importance of new issues such as e-commerce but without compromising on core issues that are important for WTO

Issues with WTO

Many analyst has said that Buenos Aires summit has highlighted the existential crisis faced by WTO especially during a time when emerging economies have adopted assertive and developed economies have adopted protectionist attitude

Institutional Issues with WTO

  1. Persistent North-South divisions
  • WTO talks are mainly seen as a showdown between the North and the South. This is particularly so with the growth in strength of the developing countries and their regional and continental groupings.
  • Because of this no agreement is happen over the issue of agriculture subsidies despite of several rounds of talks
  1. Structure and operational procedure of WTO
  • In WTO decision making is through consensus. This has translated into making the WTO decision making long and subject to external manipulation.
  • Most of the time political and ideological differences come in a way of reaching a consensus
  1. Implementation problem
  • This relates basically to the difficulties that mainly developing countries face in meeting their obligations under the WTO agreements.
  • The two main areas that have affected implementation by developing countries have been the TRIPS and the Sanitary and Phytosanitary (SPS) measures agreements.
  1. Not all countries joined
  • Not all world countries have joined it makes it a less effective organization. Countries such as Iran, Iraq, Lebanon, Uzbekistan has not joined WTO yet.
  • With an increasingly global trading system, member countries do not operate in isolation and trade with WTO member countries only.
  1. Strong influence of Corporate
  • The WTO essentially protects multinational corporations based in the North and acts as a tool of rich and powerful countries – notably the US, the EU, Japan and Canada.

Other Issues

  1. Trade vs development agenda within WTO
  • The US here tried to separate trade from development and objected to mention centrality for development at the preparation of the declaration.
  • The US stand will adversely affect the development interest of the developing world.
  1. Plurilateralism Vs Multilateralism
  • Plurilateralism represents a reaction to the failure of multilateralism when some countries not willing to move forward with the liberalisation process. A plurilateral agreement implies that WTO member countries would be given the choice to agree to new rules on a voluntary basis.
  • At the Buenos Aires, the developed countries led by the US and the European Union formed groups on e-commerce, investment facilitation and MSMEs within the WTO with more than 70 members in each group.
  • But the Paradox with plurilateralism is that it may heart both traditional multilateral principles and international trading system
  1. Protectionism Vs Free Trade
  • There is a trade war between US and China despite both being a member of WTO. This negates the core non-discriminatory principle of WTO
  • US and China have imposed counter-productive duties, accusing each other of harming their domestic interests.
  • WTO has not been able to prevent the trade wars despite best efforts and has been labelled as a talk shop.
  1. Dispute settlement mechanism
  • While WTO’s dispute settling mechanism allows aggrieved parties to file cases against member-states. But some of the cases and issues have remained unresolved for a long time
  • Recent WTO report shows that there is rapid increase in dispute between the member nations. It is being alleged that developed countries deliberately weaken the dispute resolution mechanism within WTO

Way Ahead

  • Need of free trade is required more by developing countries like India than developed countries. So Developing countries must work collaboratively to strengthen WTO
  • There is a need to collaborate effectively and learn from the past experiences when India and China led the developing countries in environmental forums, garnering funds in the form of GCF.
  • There is need for the structural reformin the WTO functioning as multilateral trading system
  • Despite WTO being a democratic organization, there is a need to make it more effective in protecting the interests of small nations against stronger countries. The process of retaliation is ineffective and too impractical for smaller players.
  • WTO needs to strengthen the dispute settlement mechanism as there are issues in appointment of judges in new appellate body
  • Lastly, WTO needs to enhance discussion mechanism by introducing wider consultations. It has been a long standing complaint by the smaller participants that the consultations or decision making is limited to the green room of DG of WTO.
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