The capability of the World Trade Organization (WTO), as the supreme body of trade rules, has been questioned on several occasions at international fora. There is an ongoing debate on whether the WTO losing its relevance to address many of the issues pertaining to trade issues and resolve disputes among its members based on its dispute settlement mechanism.
A growing number of members, primarily from the developed world, started questioning the ability of the trade body to resolve matters, which had been pending for a long time. There is a feeling among the developing nations as well; they feel the WTO has largely failed to protect their interests. The same perception was expressed by the developing countries in the recently concluded G20 meeting in Japan.
The establishment of General Agreement on Tariffs and Trade (GATT) in 1947, and subsequently the WTO in 1995, brought about a massive development in the regulatory framework of world trade. It initiated a rulebased order for trade, put in place an automatic legal dispute settlement system for its members, and a mechanism to support the interests of developing economies. The WTO has largely been successful in achieving its primary objectives.
However, its foundations have been shaken over the past few years for several reasons. The WTO suffered its first setback with the failure of the Doha Development Agenda (DDA) in 2015. In 2001, the ambitious DDA was launched to substantially lower trade barriers, support poor nations and resolve difficult issues such as agricultural subsidies. The failure of this programme seriously undermined the credibility of the multilateral trading system and put developing nations in peril.
Since the establishment of the WTO, only a few multilateral trade negotiations have been held. So far, members have not been able to reach a consensus on agricultural subsidies, food security, banning subsidies for illegal fishing, intellectual property rights, and trade in services. The countries could not enolve a solution to issues like e-commerce even after a decade of discussions. Frustrated with the pace of development in WTO, 76 member countries launched an informal discussion on this topic.
Developing countries led by India, South Africa, and their developed counterparts hold others responsible for this deadlock. In the Trumpian era, the WTO has been further threatened with Donald Trump threatening to pull out of it. The US President withdrew the United States from the Trans-Pacific Partnership Agreement (TPPA) on his first day in office claiming that the US had been victimised by its trading partners.
The United States unilaterally imposed tariffs on much of the industrialised world rather than bringing these disputes to the WTO. This is in sharp contrast to the Obama administration, which relied on the WTO process and filed 25 enforcement complaints with the entity between 2009 and 2017. The number of complaints made by the US was higher than any other country during that time. Notably, sixteen of these complaints were against China.
The Trump administration’s discontent with regard to WTO’s dispute settlement mechanism and its refusal to appoint judges to the Appellate Body has intensified the uncertainty regarding its future. If judges are not appointed by December 2019, the dispute settlement body will become non-functional. The WTO also faces the problem of a surfeit of unresolved issues. There has been pressure from some members to include many non-trade issues like labour and environment standards, foreign investment, competition, government procurement, investment, facilitation and trade.
It is high time for member-states to unite and adopt corrective measures and halt the WTO from losing its relevance. The member states should immediately strike a deal on the vital issues of the dispute settlement mechanism, thereby averting the acute danger of the WTO falling apart. Failure of the WTO would be a severe shock not only to the multilateral trading system but also to the global economy as a whole. India has now formed a coalition of nine countries ~ India, South Africa, Bolivia, Cuba, Uganda, Zimbabwe, Ecuador, Tunisia and Malawi ~ to place special provisions for developing countries and high farm subsidies in advanced nations that harm African states at the forefront of global trade talks. Stating that special and differential treatment (S&DT) is a “non-negotiable right for all developing countries”, the grouping said, “all members, no matter their trade share, must have an equal say in decision making” of the WTO as mandated in the terms of engagement.
These nine countries have suggested preservation of consensus decision-making and reaffirming special provisions for developing countries to address asymmetries in global trade. The US and Canada, among other countries, have questioned the eligibility of developing countries for special provisions even as they propose framing rules for issues such as e-commerce and investment, which don’t have the multilateral mandate. China, Canada, the US and Norway have also submitted reform proposals, but according to experts a coalition on S&DT is a key milestone for the developing nations.
S&DT are special provisions for developing countries which allow them more time to implement agreements and commitments, include measures to increase trading opportunities, safeguard their trade interests, and support to build capacity to handle disputes and implement technical standards. The US has proposed withdrawal of these proposals for emerging economies, which are members of the Organisation for Economic Cooperation and Development (OECD) and G20, classified as “high income” by the World Bank or account of more than 0.5 per cent of the global merchandise trade. No country can fight alone and the joint proposal is a victory for developing members because it will draw other countries to join the coalition.
This carries substantial political weightage. Highlighting the inequities in various global trade treaties, the nine countries said the Agreement on Agriculture has allowed developed countries to continue their high subsidies on agricultural products, including those exported to developing countries, impacting their small farmers’ livelihood and food security.
“Laws and regulations of WTO members which mandate unilateral action on trade issues that are inconsistent with WTO rules need to be amended. This will ensure that WTO members are not perpetually under threat of unilateral action on trade issues by some members,” India said in a concept paper presented to the General Council of WTO on 11 July. It was supported by South Africa, Zimbabwe, Cuba, Bolivia, Ecuador, Malawi, Tunisia and Uganda.
(The writer is author of World Trade Organisation: Implications for Indian Economy (Pearson Education) and is retired senior professor of International Trade. He may be reached at [email protected])