Relevance of WTO in Changing Global Trade Landscape

Syllabus: GS2/Effects of Policies on India’s Interest; GS3/Agriculture

Context

• In recent years, the relevance of the World Trade Organisation (WTO) has been questioned due to institutional paralysis, stalled negotiations, and rising protectionism.

About the World Trade Organisation (WTO)

• It is the only global international organisation dealing with the rules of trade between nations.
• Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.

Formation of WTO

• Predecessor: The General Agreement on Tariffs and Trade (GATT) was established by a multilateral treaty of 23 countries in 1947 after World War II.
  • GATT was designed to provide an international forum that encouraged free trade between member states by regulating and reducing tariffs on traded goods and by providing a common mechanism for resolving trade disputes.
• The Marrakesh Agreement: The establishment of the WTO was agreed upon during the Uruguay Round of GATT negotiations, which took place from 1986 to 1994.
  • It was signed by 123 nations on April 15, 1994, marking the culmination of the Uruguay Round and the official establishment of the WTO.
  • It expanded upon the scope of the GATT to include new areas such as services, intellectual property, dispute resolution, and trade policy review mechanisms.
• The WTO officially commenced operations on January 1, 1995, in accordance with the 1994 Marrakesh Agreement, replacing the GATT.

Organisational Structure of WTO

• Ministerial Conference: The WTO’s apex decision-making body is the Ministerial Conference, which usually takes place every two years.
• General Council: It is just below the Ministerial Conference that meets several times a year at the WTO’s headquarters in Geneva.
  • It meets as the Trade Policy Review Body and the Dispute Settlement Body.
  • Trade Related Intellectual Property Rights (TRIPS) Council: It is for the Goods, Services, and Intellectual Property, and it reports to the General Council.

Challenges Facing the WTO

• Dispute Settlement Crisis: The Appellate Body, WTO’s apex dispute resolution forum, has been non-functional since 2019 due to the U.S. blocking judge appointments.
  • Countries now resort to bilateral retaliation and unilateral trade measures, weakening the WTO’s enforcement mechanisms.
• Rise of Protectionism: The U.S.–China trade war, export restrictions, and sanctions reflect growing disregard for WTO norms.
  • Many nations violate Most Favoured Nation (MFN) principles, fragmenting the global trade order.
• Stalled Negotiations: The Doha Development Agenda (2001) aimed to address developing nations’ concerns but has stalled for over two decades.
  • No meaningful consensus has been reached on agricultural subsidies, fisheries policies, or digital trade regulations.
• Failure to Address Emerging Trade Domains: WTO lacks binding rules on e-commerce, digital taxation, and climate-related trade policies.
  • Countries increasingly form regional trade agreements, bypassing WTO frameworks.
• Marginalization of Developing Nations: Developing countries argue that their interests are sidelined in WTO negotiations.
  • Special and Differential Treatment (S&DT) provisions are under threat, limiting their ability to protect domestic industries.

India’s Position on WTO Reforms

• Support for Multilateralism: India advocates for a rules-based global trading system but opposes premature liberalization that could harm domestic industries.
• Concerns Over Digital Trade Regulations: India has taken a cautious stance on data localization and e-commerce rules, fearing dominance by tech giants.
• Push for Agricultural Reforms: India demands fair agricultural trade policies, including public stockholding for food security.

Way Forward: Reform or Replacement?

• Reviving the Dispute Settlement Mechanism: Reforms are needed to restore the Appellate Body, ensuring fair resolution of trade disputes.
• Addressing Digital and Climate Trade Issues: WTO must establish binding rules on e-commerce, carbon border taxes, and green subsidies.
• Ensuring Fair Representation: Developing nations must have greater influence in trade negotiations, ensuring equitable policies.
• Special and Differential Treatment (SDT): Revisiting criteria that allow self-declared ‘developing’ countries like China to claim benefits.

Conclusion

• While the WTO faces institutional challenges, it remains a crucial pillar of global trade governance.
• Reforming its dispute resolution system, negotiating framework, and trade policies is essential to restore its relevance in the modern economic landscape.

Source: TH