GATTi-fication of WTO

Context: The World Trade Organisation's appellate body is not fully functional from 2019, as the US is blocking appointments in the WTO's highest adjudicatory body.

Major Highlights:

• The appointment process to the WTO’s Appellate Body members operates by consensus, thus a member can block an appointment by formal objection.
• In 2016, the United States blocked one proposed reappointment to the Appellate Body and since then has continued its refusal to entertain measures to fill the vacancies, citing the lack of progress toward reforms of the Appellate Body.
• The US has accused WTO’s Appellate Body of procedural inefficiency (dissatisfaction in handling of issues like subsidies, tariffs, IPR disputes), judicial activism, and being lenient towards China.
  • As per the US, China is misusing the WTO principles to gain undue advantage in trade with the US. 
• The step came as a response to the WTO’s decision against the US regarding protectionist trade policies to control trade from China, especially in the patent régime. 

About World Trade Organisation

• WTO is an international organisation that regulates global trade. Established in 1995, replacing the General Agreement on Tariffs and Trade (GATT).
  • GATT was established in 1948, was a multilateral treaty aimed at promoting international trade by reducing tariffs and trade barriers. 
• Key Principles of the WTO:
  • Non discrimination in trade i.e., no nation should be treated as less favourable. 
  • Market access by reducing tariffs and quotas. 
  • Predictability of market and trade policies. 
  • Fair competition by reducing unfair trade practices like subsidies and dumping. 
  • Development and inclusivity in the trade related growth. 
• How does WTO differ from GATT?
  • Legal mechanism- GATT was a provisional agreement and lacked the legal status as WTO
  • Dispute resolution- GATT's decree was not legally binding unlike the WTO, where decisions are legally binding in nature. 
  • Institutional structure- GATT lacked the concrete institutional structure unlike WTO, where there is a well defined structure like Ministerial conference and General Council. 
  • Membership- GATT had contracting parties, but WTO has full time member nations. 
  • Scope- GATT was limited to goods trade. Whereas, WTO rules regulate different aspects of international trade: goods, services, and intellectual property.

GATT-fication of WTO: The term means that the WTO is losing its value as a structured dispute resolution agency and becoming a mere agreement. 

Challenges faced by WTO include

• Stalemate in Negotiations: Doha Development Round (2001) remains unresolved due to disagreements between developed and developing nations on issues like agricultural subsidies, industrial tariffs, and services.
• Consensus Mechanism: In the WTO, the principle of decision making by consensus has resulted in the slowdown of multilateral agreements, as it requires 100% of the members to go forward.
• Dysfunctional dispute settlement system: The decree of WTO council lacks implementation due to the continuous stalemate at the appellate agency.
  • The WTO appellate body has been redundant since 2019, because of US obstruction to new appointments in the body. As a result many trade disputes are pending at WTO.
• Protectionist Polices: WTO has been ineffective in controlling protectionist policies pursued by the member countries. E.g., the US misused the ‘National security clause’ to increase import duties on steel and aluminium products from China. 
• Misuse of developing country status: Developed economies like Singapore and China have taken unfair advantage of “developing country” status to seek temporary exemptions from commitments under various multilateral trade agreements. 
• Inequality in Global Trade: Developing countries often criticise the WTO for favouring developed nations due to imbalances in negotiation power.

Way Forward

• Appointment of officials: Democratisation of the process of appointment of appellate body members to ensure smooth functioning of WTO. 
• Democratisation of power: Reforms to provide developing countries more power in WTO to ensure balance in power dynamics, presently tilted in the favour of developed nations. The reforms are needed to reduce the misuse of power. 

Conclusion: WTO is an important agency to ensure free and fair trade. But politicisation of agency and geo-political tassels are pushing back the agency into the era of GATT. In the wake of rising protectionism, proliferation of exclusionary trade blocks and rising bilateral free trade agreements, it is imperative to reform the WTO system to ensure rule-based multilateral trade across the countries.