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SANSAD TV: PERSPECTIVE- WTO REFORMS

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Introduction:

The 12th Ministerial Conference of WTO took place from 30th November to 3rd December in Geneva. The World Trade Organization is the principal forum for setting the rules of international trade. For the past two and a half decades, it has helped reduce barriers to trade in both goods and services and created a dispute resolution system that supporters say reduced the threat of trade wars. However with negotiations on a comprehensive development agenda foundering due to disagreements the WTO is under considerable pressure to achieve meaningful results. The committee on agriculture is yet to find a solution to the issue of Public Stockholding. India has warned that there is an attempt to drive a wedge between developing and least developing countries on public stockholding and sought a permanent solution on an issue that is critical for procurement by agencies such as Food Corporation of India. Commerce and Industry Minister Piyush Goyal has also recently said that developed countries linking WTO reforms with special and differential treatment being provided to poor and developing nations, is unfair and the trade body needs to reassess the way it h

Problems facing the WTO are:

  • Dispute settlement cases continue to be filed for the time being and are being litigated. A civil dialogue over trade issues persists.
  • 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.
  • Dimensions of its structures and functions are fragile, creaking, and failing in parts.
  • 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.
  • 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.
  • 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.
  • 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?

  • 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.
  • Launch negotiations to address the intertwined issues of agricultural subsidies and market access, while recognising that food security concerns will not disappear.
  • A credible trading system requires a dispute settlement system that is accepted by all.
  • 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.
  • 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 as been conducting its affairs.

Fisheries, e-commerce:

  • Although discussions on fisheries subsidies have been hanging fire for a long time, there is considerable push for an early conclusion of an agreement to rein in these subsidies.
  • However, the current drafts on this issue are completely unbalanced as they do not provide the wherewithal to rein in large-scale commercial fishing that are depleting fish stocks the world over, and at the same time, are threatening the livelihoods of small fishermen in countries such as India.
  • In recent months, the proposal by the members of the Organisation for Economic Co-operation and Development and the G-20 members to introduce global minimum taxes on digital companies has made headlines.
  • But in the WTO, most of these countries have been investing their negotiating capital to facilitate the expansion of e-commerce firms. Discussions on e-commerce are being held in the WTO since 1998, after the adoption of the Ministerial Declaration on Global Electronic Commerce wherein WTO members agreed to “continue their practice of not imposing customs duties on electronic transmissions”.
  • Fast forward to the discussions in 2021, and a key focus of the 1998 e-commerce work programme, namely “development needs of developing countries”, is entirely missing from the text document that is the basis for the current negotiations.
  • On the negotiating table are issues relating to the liberalisation of the goods and services trade, and of course guarantee for free flow of data across international boundaries, all aimed at facilitating expansion of businesses of e-commerce firms

Conclusion:

  • In response to this the WTO may say that free trade has been an important engine of growth for developing countries in Asia. Although there may be some short-term pain, it is worth it in the long run.
  • Also, the WTO has sought to give exemptions for developing countries; enabling in principle the idea developing countries should be allowed to limit imports more than developed countries.