From UPSC perspective, the following things are important :
Prelims level : Nothing much
Mains level : WTO - developing country status
US as accused developing countries such as China and India of unfairly benefitting from their “developing country” status under the WTO regime.
- The regime permits countries with special and differential treatment.
- It also let developing countries adhere to less onerous norms such as longer periods of compliance, without violating the WTO rulebook.
Why the US took this stand?
- WTO dispute settlement system has favoured developing countries. The US has lost most of the disputes raised against it.
- Trump recently attacked the US’ dispute settlement system by not allowing the appointment of new members on the appellate body.
- The US already has a running trade war with China.
- So far, Trump had adopted revisionist policies on trade by pulling out of TPP, forcing changes in the NAFTA, etc.,
Problems with US’ stand
- The US and other rich countries have always enjoyed SDTs in agreements on textiles and clothing, and also agriculture. Even today, the subsidies given in the West to rich farmers continue to operate unabashedly.
- Despite the shrinking contribution of agriculture to the US GDP, it has been pointed out that the per-farmer subsidy in the US is 70 times that of China, 176 times that of Brazil and 267 times that of India.
- The textiles and clothing agreement was used as a trade-off with the deal on intellectual property rights. The latter continues to function but the trade-off did not adequately benefit countries exporting apparel.
Need for a change in country status at the WTO
- The international community has failed to ensure that global trade benefits all and that subsidies help the poor.
- Irrespective of their status, all countries house their share of the poor and not-so-poor.
- Rules of the multilateral trading system have evolved with the objective of reducing barriers to free trade in a manner that its benefits are spread across communities and protections are accorded to weaker sections. For farms in the West, different standards have been adopted.
- India is home to more than 600 million poor people. It needs to continuously review and fine-tune its efforts to reduce poverty by implementing necessary bold and structural reforms to empower the poor to overcome poverty.
- There is a need for an impartial, operational and effective dispute settlement mechanism at the WTO.
- The US must review its position and engage with the global community to design an effective dispute settlement mechanism.
Unilateral efforts, such as those proposed by the US, and its threat of leaving the WTO, are likely to do more harm than good, particularly to the intended beneficiaries of such actions. However, an opportunity has been created by the US and it must be seized by the global community to adopt a nuanced approach towards reforming the WTO.