What are the problems of WTO led trade regime. What reforms do you suggest to ensure that world trade runs sustainably to uplift the poor across the world. (250 Words)

Mentors Comments:

The question highlights the various factors that have led to the weakening of WTO led trade regime and how the policies of WTO have impacted developing countries such as India which are important in combating poverty. At a time when trade war between us and China has had significant bearing on economies of countries such as India and India is in the process of negotiating in mega regional trade deals, the significance, impact and future of WTO becomes important.

The question expects us to bring out the the factors off late that have led to dwindling consensus over the principles of WTO, an analysis of what this means for the future of WTO, and what reforms are needed in the WTO regime.

In the introduction discuss the current geoeconomic climate and why consensus over trading principles and institutions is dwindling.
Explain the factors that have led to a considerable decline in the status of WTO – bring out the opposition of USA under Trump, lack of any significant achievement even two decades post Doha round, the rising number of bilateral and multilateral treaties etc
Also, slightly touch upon the WTO-RTA debate
Give your view on whether the status of WTO has actually declined or is it just a minor blip
Discuss the impact that policies of WTO has had on poverty reduction in developing nations like India– on the issue of food security, the issue of solar cells, the lack of inroads made in services agreement etc
Conclusion – Give your view on what should be WTO’s response to this – what are the reforms needed in the WTO.

Answer:
The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade created under the Marrakesh Agreement. It is one of the world’s most powerful institution for reducing trade related barriers between the countries and opening new markets. It cooperates with the IMF and World Bank in terms of making cohesiveness in making global economic policies. Through resolving trade related disputes, the WTO has got the potential to maintain world peace and bilateral relations between its member countries thorough following negotiations, consultations and mediations.

However, today it is facing existential crisis during a time when developed economies have adopted protectionist attitude. Following are the issues with WTO are as follows-
1. Persistent North-South divisions
 WTO talks are mainly seen as a showdown between the North and the South. This is particularly so with the growth in strength of the developing countries and their regional and continental groupings.
 Because of this no agreement is happen over the issue of agriculture subsidies despite of several rounds of talks.
 Since the WTO allows countries to unilaterally classify themselves as “developing”, many countries have been happy to make use of this freedom.  So, as many as two-thirds of the 164 members of the WTO have classified themselves as developing countries.
2. Structure and operational procedure of WTO
 In WTO decision making is through consensus. This has translated into making the WTO decision making long and subject to external manipulation.
 Most of the time political and ideological differences come in a way of reaching a consensus.
 Though WTO is driven by consensus and even a plurilateral agreement needs approval of all members, the formation of these groups as an attempt to steer WTO away from its focus on multilateralism.
3. Implementation problem
 This relates basically to the difficulties that mainly developing countries face in meeting their obligations under the WTO agreements.
 The two main areas that have affected implementation by developing countries have been the TRIPS and the Sanitary and Phytosanitary (SPS) measures agreements.
4. Not all countries joined
 Not all world countries have joined it makes it a less effective organization. Countries such as Iran, Iraq, Lebanon, Uzbekistan has not joined WTO yet.
 With an increasingly global trading system, member countries do not operate in isolation and trade with WTO member countries only.
5. Strong influence of Corporate
 The WTO essentially protects multinational corporations based in the North and acts as a tool of rich and powerful countries – notably the US, the EU, Japan and Canada.
6. Trade vs development agenda within WTO
 The US has tried to separate trade from development and objected to mention centrality for development at the preparation of the declaration.
 The US stand will adversely affect the development interest of the developing world.
 Developed countries led by the US and the European Union sought to find a way out of the deadlock at the WTO talks by forming large pressure groups on e-commerce, investment facilitation and MSMEs within the WTO with more than 70 members in each formulation.
 Though WTO is driven by consensus and even a plurilateral agreement needs approval of all members, the formation of these groups as an attempt to steer WTO away from its focus on multilateralism.
 The fierce defense of ‘Trade Related Intellectual Property’ rights (TRIPs)—patents, copyrights and trademarks—comes at the expense of health and human lives.
7. Protectionism Vs Free Trade
 There is a trade war between US and China despite both being a member of WTO. This negates the core non-discriminatory principle of WTO
 Chinese mercantilism (try to influence trade and business, especially by encouraging exports and putting limits on imports), the USA’s aggressive use of unilateral tariff measures, and the inability of WTO members to reach consensus on expanding its disciplines to important new sectors in the modern economy reinforce the critique of
the WTO.
8. Dispute settlement mechanism
 While WTO’s dispute settling mechanism allows aggrieved parties to file cases against member-states. But some of the cases and issues have remained unresolved for a long time
 The U.S. has systematically blocked the appointment of new Appellate Body members (“judges”) and de facto impeded the work of the WTO appeal mechanism. The U.S. is not willing to be judged by an independent multilateral quasi-judicial institution.
 Further, the dispute resolution mechanism of the WTO, which can pass judgments on disputes, lacks the powers to enforce them as the enforcement of decisions is left to individual member states.

Way forward
 Need of free trade is required more by developing countries like India than developed countries. So Developing countries must work collaboratively to strengthen WTO.
 There is a need to collaborate effectively and learn from the past experiences when India and China led the developing countries in environmental forums, garnering funds in the form of GCF.
 There is need for the structural reform in the WTO functioning as multilateral trading system
 Despite WTO being a democratic organization, there is a need to make it more effective in protecting the interests of small nations against stronger countries. The process of retaliation is ineffective and too impractical for smaller players.
 WTO needs to strengthen the dispute settlement mechanism as there are issues in appointment of judges in new appellate body
 Lastly, WTO needs to enhance discussion mechanism by introducing wider consultations. It has been a long standing complaint by the smaller participants that the consultations or decision making is limited to the green room of DG of WTO.

Today, the world is going through the protectionism, trade war (like USA & China), and Brexit making global economy squeezed. The role of WTO in future is very crucial to preserve global liberalised economic system evolved since the end of the 2 nd  World War. It is right time when countries like USA giving threat to withdraw from WTO making it dysfunctional, India and other emerging economies like Brazil, South Africa etc can provide a
strong base for strong WTO with saving interests of developing countries. The time has come for the emerging economies and the developing world to have a greater say in how to shape multilateralism and its institutions.

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Wasim Rahman
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Pls review
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MOJO9801U00N04106675 Sir, Please Review My Answer.

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