Context: The 13th biennial ministerial meeting of the World Trade Organisation (WTO) ended without any significant accomplishments, as the member countries could not agree on how to solve several issues staring at the international community.
What is a World Trade Organisation (WTO)?
- It is an international organisation established in 1995 through the Marrakesh Treaty to promote free and fair international trade.
- It is successor to the General Agreement on Tariffs and Trade (GATT), a multilateral agreement which came into being in 1947 to promote trade in Goods.
- Under GATT, 8 rounds of negotiations took place. The 8th Round of Negotiations are referred to as the Uruguay Round (1986-94), which ultimately led to the establishment of WTO in 1995.
- The WTO is based at Geneva, Switzerland. Presently, it has 164 member countries.
Structure of WTO
- Ministerial Conference:
- The Topmost decision-making body of WTO is the Ministerial Conference.
- Usually meets every two years.
- Brings together all members of the WTO, all of which are countries or customs unions.
- The Ministerial Conference can take decisions on all matters under any of multilateral trade agreements.
- The General Council oversees the operation of the agreements and ministerial decisions on a regular basis. It also acts as a Dispute Settlement Body and a Trade Policy Review Body, each with its own chairman.
- Director General (DG), appointed for a period of four years by the Ministerial Conference, heads the Secretariat of the WTO.
What are the Principles of International Trade Subscribed by the WTO?
- Most Favoured Nation: Each of the WTO member countries should “treat all the other members equally as ‘most-favoured’ trading partners.”. "Grant someone a special favour (such as a lower customs duty rate) and you have to do the same for all other WTO members". However, some exceptions such as FTAs are allowed.
- National Treatment: Imported and locally produced goods should be treated equally. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights, and patents. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally produced products are not charged an equivalent tax.
- Special and Differential Treatment: Give developing countries special rights such as longer time periods for implementing agreements and commitments, support to help developing countries to build the infrastructure to undertake WTO work etc.
What are the Issues that the WTO is Plagued With?
- Stalemate in Negotiations: The WTO follows the process of consensus-based decision-making. However, it has frequently led to deadlocks in negotiations, thereby hindering the ability to reach meaningful agreements on crucial matters like agricultural subsidies, intellectual property rights, and market access.
- Concerns of Developing Nations: Developing countries contend that negotiations are often dominated by developed nations, giving them an edge in shaping rules that favour their interests. These countries encounter difficulties in fully engaging in negotiations and struggle with the complexities of adhering to and implementing trade regulations and standards.
- Self-Classification of Members: There are instances when relatively well-off members self-identify themselves as developing countries to take advantage of special treatment provisions. This has raised concerns about fairness and equity.
- Dysfunctional Dispute Settlement Mechanism: The WTO's dispute settlement mechanism faces a crisis due to the United States' blocking of appointments to the Appellate Body. This situation presents challenges for members in enforcing WTO obligations without a functional appeals process.
- Limited Capacity to Detect & Address Violations: There are concerns about the WTO's limited capacity to detect and address violations of its multilateral agreements in a prompt and efficient manner.
- Rise in Protectionism and Bilateralism: Recently there has been a surge in protectionist policies and a shift toward bilateral or regional trade pacts, circumventing the broader multilateral framework of the WTO.
- Emerging Challenges: Various new concerns have arisen since 1995, including the intersection of trade with issues like climate change, Sustainable Development Goals (SDGs), gender equality, and human rights. However, the WTO has lagged behind in incorporating these demands into its original framework.
How to Reform the WTO?
- Breaking the Deadlock in Dispute Settlement System: Functioning of the Dispute Settlement System is crucial in ensuring the rules-based trading order. Efforts should be made to appoint the members of the Appellate Body at the earliest.
- Enhancing Transparency to Boost Legitimacy: Enhanced transparency on both national and international levels is necessary to improve the quality and legitimacy of WTO regulations. This involves avoiding closed-door meetings or exclusive discussions (like mini-ministerials or green rooms) that exclude certain members from important decision-making processes.
- Institutional Reforms:
- Establishing an Executive Committee: To enhance the WTO's decision-making processes, there’s an inherent need to establish an executive committee to address the lack of leadership within the WTO and offer guidance for future negotiations.
- Strengthening the Secretariat's Role: The WTO should bolster the Secretariat's role as a pivotal agenda setter within the organisation and improve its ability to conduct research and gather data.
- Giving a Voice to Smaller Nations: As per the foundational principle of consensus, all members' viewpoints, including those of smaller nations, must be respected. This includes refraining from using political or economic pressure to coerce a country into agreeing to decisions that contradict its fundamental interests.
- Enhanced Technical Assistance for Developing Nations: This includes providing improved technical assistance to developing nations and granting them access to independent advice, such as from UNCTAD, to enable their full participation in WTO activities.
Conclusion
- Reforming the World Trade Organisation is of critical importance, without which the trade multilateralism will be beset with problems, thereby pushing the world to higher levels of uncertainty and volatility.