World Trade Organization (WTO) - IAS only - Nothing else (2023)

Fundamentals and background:

• The WTO is an international organization established in 1995 to replace the General Agreement on Trade and Tariffs (GATT) under the Marrakesh Agreement.
• It is the only global international organization that deals with international trade between nations.
• The head office is in Geneva, Switzerland.
• Currently, the WTO has 164 members and India is a founding member of the WTO.
• Currently, the head (general director) of the WTO is Roberto Azevedo.

Aim:

• Formulate and implement rules for international trade.
• Provide a platform to negotiate and monitor future trade liberalizations.
• Provide a platform to resolve disputes.
• Support developing, least-developed and low-income countries in transition to adapt to WTO rules and disciplines through technical cooperation and training.
• Cooperation with other major economic institutions (such as the UN, World Bank, IMF, etc.) involved in global economic governance.

WTO principles:

• nondiscrimination
• Most Favored Nation - All nations should be treated equally. No country can do a special favor to another member country. For example, if a country reduces the tariff for one country, it must also reduce it for all other member countries.
• National Treatment - Equal treatment for all products, whether national or foreign. Both local and imported products receive fair and equitable treatment.
• Reciprocity: reduction of import tariffs and other trade barriers in exchange for similar concessions from another country.
• Predictability through binding and enforceable commitments: making the business environment stable and predictable.
• Transparency: WTO members must publish their trade rules and notify trade policy changes to the WTO.
• Promotion of development and economic reform - The WTO system does everything possible to contribute to development.

Important WTO trade agreements:

• Agreement on Agriculture (AoA),
• TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights),
• Agreement on the Application of Sanitary and Phytosanitary Measures (SPS),
• Agreement on Technical Barriers to Trade (TBT),
• Agreement on Trade Related Investment Measures (TRIMS),
• General Agreement on Trade in Services (GATS), etc.

Agreement on Agriculture (AoA):

• It was negotiated during the Uruguay Round of the GATT and concluded in 1995 with the founding of the WTO.
• Through the AoA, the WTO aims to reform agricultural trade with a fair and market-based system.
• The agreement allows governments to support their rural economies, but only allows for those policies that are least "distorting" to trade.
• This agreement contains firm commitments from all Member States to the following three agricultural supply chain systems:
• Improve market access: This can be achieved by removing various trade barriers by Member States. Setting tariffs and gradually promoting free trade between Member States, which will ultimately lead to better market access.
• Internal Subsidies – This essentially motivates to reduce internal subsidies that distort free trade and fair prices. The underlying premise is that not all subsidies distort trade equally. Under this agreement, subsidies can be divided into the following three categories:

The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council):

• Oversees the implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement).
• It provides a forum for WTO members to consult on intellectual property matters and carries out the specific tasks assigned to the Council under the TRIPS Agreement.
• The TRIPS Agreement:
  • It establishes the minimum standards for the protection of copyright and related rights, trademarks, geographical indications (GIs), industrial designs, patents, integrated circuit layout designs and undisclosed information.
  • Establishes minimum standards for the enforcement of intellectual property rights (IPR) through civil actions for infringement, border actions,
  • At least with regard to copyright and trademark piracy, in criminal proceedings.

Ministerial Conferences (CM):

Doha Declaration:

The Doha Declaration is the November 2001 Declaration that emerged from the 4th WTO Ministerial Conference held in Doha, Qatar.

• This declaration gives the mandate for negotiations on a variety of issues, including those related to the implementation of previous agreements.
• This is known as the Doha Declaration on TRIPS and Public Health.
• There were disagreements between developed and developing countries.
• The main points of contention were agriculture, non-tariff barriers to trade, industrial tariffs, services and trade aid.
• Adopted in 2013, the Bali Ministerial Declaration is the first agreement of the Doha Round and also the first unanimous agreement of the WTO.

United States and India in the WTO:

• India has won a major trade dispute against the US at the World Trade Organization (WTO) with a dispute settlement body.
• India had alleged that the local content requirements and subsidies introduced by the governments of the eight US states in the energy sector violate various provisions of the Agreement on Trade Related Investment Measures (TRIMs) and the Agreement on Subsidies and Compensatory Measures.
• India took this dispute to the WTO in 2016.
• In the same year, the US won a WTO case against India's solar energy policy, alleging that the policy resulted in a 90 percent reduction in US solar energy exports to India.
• The panel found that the subsidies and mandatory local content requirements introduced by eight US states (Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware, and Minnesota) violate global trade rules.
• The panel found that all of the US government actions in question are inconsistent with the GATT 1994 (Article III - National Treatment) as they provide an advantage for the use of domestic products, amounting to less favorable treatment. for similar imported products.

WTO Appellate Body

• Established in 1995, the Appellate Body is a seven-member standing committee that presides over appeals against rulings by WTO members in trade-related disputes.
• Countries involved in disputes over measures that allegedly violate a WTO agreement or obligation can go to the Appellate Body if they believe that the report of the body created to examine the issue warrants a legal review. Existing evidence will not be reexamined; Legal interpretations are checked.
• The Appellate Body may confirm, modify or reverse the legal determinations of the panel that heard the dispute. Countries on one or both sides of the dispute may appeal.
• The WTO dispute settlement mechanism is considered crucial to ensure smooth international trade flows.
• The Appellate Body has so far issued 152 reports. Once accepted by the WTO Dispute Settlement Body, the reports are final and binding on the parties.

WTO Appellate Body on shaky ground

• In the past two years, the number of board members has been reduced to just three instead of the required seven people.
• The understaffed Complaints Body has been unable to meet the 2-3 month deadline for filing complaints in recent years and the backlog of cases has prevented it from pursuing the procedures for complaints filed over the last anus.
• Since the Appellate Body cannot review new applications, there is already a great deal of uncertainty about the WTO dispute settlement process.
• If the agency is declared inoperative, countries may be forced to implement the agency's decisions even if they believe serious mistakes have been made.
• If that country refuses to comply with the panel's order because it has no avenue of appeal, it risks facing arbitration by the other party to the dispute.

The US has paralyzed the functioning of the WTO:

• The good and efficient functioning of theAppellate Body, considered the jewel in the crown, has presented obstacles for the US to take unilateral action.
• Various US provisions for imposingCountervailing and antidumping measuresinconsistent with the fundamental provisions of the WTO agreements.
• Eventually, the US decided to enforce the Appellate Bodydraw on hungry fundsfor its operation and the blocking of the selection process to cover six positions.
• As a result, the Appellate Body is left with a single member who cannot make decisions on pending trade disputes.
• At least three members are required to decide a dispute.

India's role:

• As the US loses interest in trade multilateralism, India should actively seek to stem the decline of the organization.
• India should be more active in making the WTO a fairer organization.
• India must work to persuade all WTO members to return to the negotiating table and negotiate on issues such as agriculture, industrial tariffs and services.
• India's positions have much in common with the attitudes of African nations; We must build bridges to Africa.
• India had to quickly forge a larger alliance to counter moves against India's interests.
• India's path to a $5 trillion economy is not possible without expanding our global trade basket.

Dispute Panels against India:

• The Dispute Settlement Body (DPO) of the World Trade Organization (WTO) recently established two dispute settlement bodies to deal with import duties imposed by India on a variety of information and communication technology products ( ICT), including mobile phones.
• This was at the request of Japan and Taiwan, bringing to three the number of agencies created to investigate the same customs-related issue.
• In June 2020, the European Union (EU) established a panel against India on the same issue.
• The panels would determine whether or not India's tariffs on imports of certain ICT products violate WTO rules.
• The bodies were set up to decide on the 20% tariffs that India imposes on mobile phones and some other ICT products.

Indian stands:

• India managed to block Japan's first request for a body on the grounds that the request undermined India's sovereignty.
• India also rejected the EU's proposal to accept a consolidated panel that would pool the complaints of the three, saving time and resources.
• India argued that the three complainants are trying to get the country to assume obligations under the Information Technology Agreement II (ITA-II) which it has never agreed to.

India's trade interests and the WTO:

• Steel and Aluminum Tariffs: The US government recently imposed 10% aluminum and 25% steel tariffs on various trading partners. India wants it removed or will raise the issue in the WTO.
• Export Subsidy Issue – Recently the US dragged India into the WTO, which raised concerns about the export subsidy scheme given to Indian companies in the form of SEZ, MEIS, EPCG etc. The US argues that India's per capita income has risen by $1,000 and cannot benefit from ASCM's export subsidy scheme.
• Farm Subsidies: The current subsidy rate is based on 1986-88 price levels. Currently, the concept of Minimum Support Price (MSP), which provides subsidies to farmers in India, is included in the yellow box. It can have a direct impact on India's food security program. India wants it to stay at current price levels and the amber box concept to be removed. However, thanks to a "peace clause" agreed at the Bali conference, India can continue its PDS program with immediate effect. But the developed member states are not taking any steps towards a permanent solution to this problem.
• Special and Differential Treatment (SDT) – During the Doha Round, member states agreed to give preferential treatment to developing countries. Developed countries, however, deny that emerging economies like India and China do not deserve this provision.
• Issues related to intellectual property rights - Compulsory licensing issues for medicines have been resolved through TRIPS. However, developed nations are trying to push TRIPS+ forward

Challenges:

• Dispute resolution procedures will remain pending and processed for the time being. A civil dialogue on trade issues is ongoing.
• The technical functioning is today completely inadequate to face the great challenges of the strategic relevance of the WTO in the 21st century. In critical areas, the organization has not reacted, adapted or delivered.
• The dimensions of its structures and functions are fragile, they creak and partially fail.
• The operation of state-owned enterprises engaged in commercial activities disrupts and distorts the General Agreement on Tariffs and Trade (GATT)/WTO operating assumption that international trade should be conducted primarily by private sector actors in response to supply and demand. demand through price in a market economy.
• Many WTO members are responsible for the use of trade-distorting domestic subsidies. Agricultural and industrial subsidies have created deadlocks in the system and provoked protectionist reactions from several WTO members.
• Deadlocks and stalemates at the Appellate Body stage of the WTO dispute settlement system have triggered the current crisis.
• The WTO lost the critical balance between the organization as an institution established to support, consolidate and link economic reforms to counter harmful protectionism, on the one hand, and the organization as an institution for the judicial settlement of disputes, on the other.
• The multilateral system for settling trade disputes has been under intense scrutiny and constant criticism for years. The US has consistently blocked the appointment of new Appellate Body members ('judges'), effectively impeding the work of the WTO Appellate Mechanism.
• Protectionism on the Rise: In the last two years, governments have imposed trade restrictions covering a significant part of international trade, impacting $800 billion in global imports in the last year alone. The WTO has been less influential in addressing these issues, including the US-China trade war. This raised questions about the credibility of the WTO.
• The WTO has played a very limited role in solving other world trade problems, such as food security, climate change and global trade imbalances.
• The Doha Development Round focused on removing major trade barriers in sectors such as agriculture, manufactured goods, and services. However, after a decade of talks, it is still not finalized.

way to go:

• A living WTO cannot allow contradictory economic models of the market and the State. All WTO members will have to accept the operating assumption of a free market, private sector, competition driven rules-based order.
• Start negotiations to address the interrelated issues of farm subsidies and market access, and recognize that food security concerns will not go away.
• A credible trading system requires a widely accepted dispute settlement system.
• Start serious negotiations to restore balance, and this must be done in an open and plurilateral way that cannot be blocked by those who do not want to move forward.
• GATT/WTO rules are outdated in some areas. New rules are needed to keep up with market and technology changes. Rules and disciplines need to be updated on issues ranging from trade-distorting industrial subsidies to digital trade.
• The basic starting point must be a reaffirmed commitment to the liberal organization of the market, based on rules and with a development policy dimension.

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