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WTO reforms

Topics covered:

  1. Important International institutions, agencies and fora, their structure, mandate.

 

WTO reforms

 

What to study?

For prelims: WTO- establishment, functions, associated bodies.

For mains: Need for reforms and suggested reforms.

 

Context: WTO reforms must be taken up by all member countries: Piyush Goyal.

 

Need of the hour:

The World Trade Organization remains an indispensable organisation but it requires urgent modernisation. Members have to face the reality that the organisation requires non-cosmetic, serious root-and-branch reform for a WTO adapted to 21st century economic and political realities.

 

Problems facing the WTO are:

  1. Dispute settlement cases continue to be filed for the time being and are being litigated. A civil dialogue over trade issues persists.
  2. Technical functioning is now wholly inadequate to meet the major challenges to the strategic relevance of the WTO in the 21st century. In critical areas, the organisation has neither responded, nor adapted, nor delivered.
  3. Dimensions of its structures and functions are fragile, creaking, and failing in parts.
  4. Functioning of state enterprises engaging in commercial activities is interfering with and distorting the operative assumption of the General Agreement on Tariffs and Trade (GATT)/WTO that international trade is to be conducted, principally, by private sector operators in response to conditions of supply and demand through price in a market economy.
  5. 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.
  6. Blockage and deadlock in the Appellate Body stage of the WTO dispute settlement system triggered the present crisis.
  7. The WTO lost the critical balance between the organisation as an institution established to support, consolidate, and bind economic reform to counter damaging protectionism, on the one hand, and the organisation as an institution for litigation-based dispute settlement, on the other hand. 
  8. For years now, 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 (“judges”) and de facto impeded the work of the WTO appeal mechanism.

 

 

What needs to be done?

  1. A vibrant WTO cannot accommodate conflicting economic models of market versus state. All WTO members will have to accept the operative assumption of a rules-based order steered by a market economy, the private sector, and competition.
  2. Launch negotiations to address the intertwined issues of agricultural subsidies and market access, while recognising that food security concerns will not disappear.
  3. A credible trading system requires a dispute settlement system that is accepted by all.
  4. Launch serious negotiations to restore the balance, and we must do so in an open-ended plurilateral manner that cannot be blocked by those who do not want to move ahead.
  5. 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.

 

Way ahead:

A reformed WTO will have to be constructed on the foundation of liberal multilateralism, resting on open, non-discriminatory plurilateral pillars, an improved Appellate Body, explicit accommodation of regional trade agreements, and appropriate safety valves for rules-based sovereign action. A reaffirmed commitment to the rules-based liberal market order with a development dimension must be the foundational starting point.