Reforming WTO

GS Paper 2

 Syllabus: Important International Institutions, agencies and fora – their Structure, Mandate

Source: IE

 Context: The recently concluded G20 working group meeting on trade and investment focused on the important issue of WTO reform.

World Trade Organization (WTO):

• It is a member-driven, consensus-based intergovernmental organisation that regulates and facilitates international trade between nations.
• It is the world’s largest international economic organisation (HQ – Geneva, Switzerland), with 164 member states representing over 98% of global trade and global GDP.
• It officially began operations on January 1, 1995, in accordance with the 1994 Marrakesh Agreement.
• It replaced the 1948 General Agreement on Tariffs and Trade (GATT).

What led to the establishment of the WTO?

• The prevailing idea that trade policy is foreign policy because economic interdependence would deter security confrontation.
• The WTO aimed at legalising and policing economic interdependence.

Current situation:

• Today’s world is dominated by geoeconomic considerations and heightened securitisation of international economic relations.
• The pursuit of unilateralism in international economic relations, especially by developed countries like the US.
• Economic policies such as industrial subsidies and local content requirements have made a comeback.
• There is a deliberate effort to weaken trade multilateralism in favour of external plurilateral alignments keeping the big power confrontation in mind.

Challenges: A weak WTO perfectly suits the US as part of its foreign policy aimed at strategic rivalry with China.

The role to be played by G20:

• The G20 members are key players in the WTO.
• The push for WTO reforms must come from G20’s “middle powers” such as India, Indonesia, Brazil, and South Africa.

Critical areas that developing countries should focus on:

• The presence of special and differential treatment (SDT) principles in WTO agreements.
  • SDT provisions give special rights to developing countries and obligate developed countries to treat the former more favourably.
  • However, only 21% of the SDT provisions in various WTO agreements oblige developed countries to actually provide differential treatment to developing countries.
  • Therefore, SDT provisions need to be given more teeth and any effort to weaken this treaty-embedded right in the name of WTO reform should be opposed.
• The appellate body – the 2nd tier of the WTO’s two-tiered dispute settlement body – remains paralysed since 2019.
  • This is part of the US’s overall game plan to dilute the policing part of the WTO to pursue trade unilateralism without many checks.
  • The remaining G20 countries need to either persuade the US or resurrect the appellate body without the US.
• There is a need to develop a multilateral governance framework for plurilateral agreements.
  • From 2017 onward, there has been a shift away from consensus-based decision-making principles toward plurilateral discussions on issues like investment facilitation.
  • However, forcing plurilateral agreements on non-willing members will accentuate the trust deficit between developed and developing countries.
  • Therefore, a multilateral governance framework should include key principles of non-discrimination, transparency and inclusivity in the WTO rulebook.
• It is imperative to address the transparency gap in the WTO.
  • Although WTO member countries are obliged to notify all their laws and regulations that affect trade, compliance with this obligation is poor.
  • This increases the cost of trade, especially for developing countries.

Conclusion:

• Trade multilateralism might be out of fashion, but remains of vital salience for countries like India.
• Therefore, under its Presidency of the G20, India should work with others to drive the WTO reforms agenda aimed at making trade multilateralism inclusive.

Insta Links:

Proposed reforms to WTO will hurt developing nations: India

Mains Links:

What are the key areas of reform if the WTO has to survive in the present context of ‘Trade War’, especially keeping in mind the interest of India? (UPSC 2018)

Prelims Links: (UPSC 2015)