WTO and India

How to restore WTO’s authority

WTO | 2023 News items - Members share views in informal talks on trade and  industrial policy

Central Idea:

The ongoing crisis in the World Trade Organisation’s (WTO) dispute settlement mechanism (DSM), particularly the paralysis of the appellate body (AB) due to the US blocking the appointment of new members, poses a significant challenge to the multilateral trading regime. Developing countries like India are pushing for the restoration of the AB to its original form, but alternative options are being considered due to the US’s reluctance.

Key Highlights:

  • The DSM, particularly the AB, is crucial for ensuring compliance with WTO rulings and maintaining a rules-based global trading system.
  • The US has blocked the appointment of new AB members since 2019, rendering it ineffective and undermining the enforcement of WTO rulings.
  • Developing countries, led by India, are advocating for the restoration of the AB to its original form to ensure fairness and predictability in dispute resolution.
  • Alternative options include joining interim arrangements led by the European Union or proposing a diluted AB with limited powers, but these may compromise the effectiveness of the DSM.
  • Scholars propose a compromise solution where countries can opt out of the AB’s jurisdiction, allowing its restoration while accommodating the US’s concerns.

Key Challenges:

  • The deadlock caused by the US’s opposition to the AB’s functioning has led to a crisis in the DSM, undermining the WTO’s authority.
  • Developing countries face the challenge of balancing their desire for a fully functioning AB with the need to accommodate the US’s concerns to maintain consensus within the WTO.
  • Alternative solutions, such as interim arrangements or diluted AB proposals, may lack the necessary enforceability or compromise the integrity of the DSM.

Key Terms:

  • World Trade Organisation (WTO)
  • Dispute Settlement Mechanism (DSM)
  • Appellate Body (AB)
  • Interim Appeal Arbitration Arrangement (MPIA)
  • International Court of Justice (ICJ)

Key Phrases:

  • “Crisis in the dispute settlement mechanism”
  • “Paralysis of the appellate body”
  • “Developing countries’ advocacy”
  • “Alternative options”
  • “Compromise solution”

Key Quotes:

  • “The WTO’s DSM — its crown jewel — comprises a binding two-tiered process with a panel and an appellate body (AB).”
  • “Consequently, countries have found an easy way to avoid complying with the WTO panel rulings. They appeal into the void, thereby rendering the WTO toothless.”
  • “A fully functional dispute settlement, with the checks and balances that the appellate body provides, is the best bet for the developing world.”
  • “India and other developing countries should continue striving for the ideal solution: The restoration of the AB in the form it existed till 2019.”

Key Statements:

  • “The ongoing crisis in the dispute settlement mechanism (DSM) poses a significant challenge to the multilateral trading regime.”
  • “Developing countries are pushing for the restoration of the AB to its original form to ensure fairness and predictability in dispute resolution.”
  • “Alternative options may compromise the effectiveness of the DSM and undermine the enforcement of WTO rulings.”

Way Forward:

  • Advocate for Restoration: Developing countries should continue advocating for the restoration of the AB to its original form, emphasizing its importance for ensuring fairness and predictability in the global trading system.
  • Explore Compromise Solutions: Consider compromise solutions, such as allowing countries to opt out of the AB’s jurisdiction, to accommodate the concerns of key stakeholders like the US while maintaining the integrity of the DSM.
  • Strengthen Interim Arrangements: If necessary, explore joining interim arrangements led by entities like the European Union to provide temporary solutions while working towards a more permanent resolution within the WTO framework.

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