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Recently, the 13th Ministerial Conference (MC13) of the World Trade Organization (WTO) concluded without significant progress, as agreement on major issues remained elusive. The challenge of reforming the WTO continues to be a critical issue.
Nonetheless, India's Minister of Commerce and Industry, Piyush Goyal, highlighted that India has successfully preserved its policy flexibility to support its agricultural sector.
MORE ON NEWS (OUTCOMES OF MC 13 OF WTO)
Areas
India’s demand
Outcomes & Impact on India
Agriculture
India, along with other developing countries, has sought a ‘permanent solution’ to the public stock holding issue.
No agreement was reached on the public stock holding issue. Developed nations, such as the European Union, have opposed public stock holding programs on the ground that could impact the food security of other countries.
India faces no immediate threat to its public stock holding program due to the ‘peace clause’.
Fisheries Subsidies
India acknowledged the negative impact of subsidies on the fisheries sector. India emphasised on the need to curb harmful subsidies for countries engaged in distant water fishing.
Member nations failed to produce an outcome document regarding subsidization of fisheries. The ministerial declaration did not mention fisheries subsidies.
India retains full policy space for the benefit of its artisanal fisheries. The livelihoods of fishermen, particularly those fishing up to 200 nautical miles beyond territorial waters, is safeguarded.
E-Commerce
India opposed the continued exemption of Customs duties on e-commerce or electronic transmission. India has argued that the moratorium adversely affected revenue collections. India also wanted an assessment of the moratorium’s scope and its impact on other countries.
WTO nations agreed to maintain the current practice of not imposing Customs duties on electronic transmissions until the next ministerial conference or March 31, 2026, whichever is earlier.
The extension of tax breaks for Big Tech will impact the tax revenue collection of India. It curtails the policy space for undertaking digital industrialisation in India and escaping digital colonisation.
Dispute Settlement Mechanism
India has demanded the establishment of a fully functional dispute settlement system for amicable resolution of disputes.
Countries have resolved to establish a fully functioning dispute settlement system accessible to all members by the end of 2024.
WTO & MINISTERIAL MEETINGS
The World Trade Organization (WTO) stands as the sole global entity overseeing the regulations governing international trade among countries. It was established in 1995, succeeding the General Agreement on Tariffs and Trade (GATT), with its creation sanctioned by 124 countries under the Marrakesh Agreement.
The organization operates on a consensus-based decision-making process, allowing any member country the power to block decisions by exercising their right to veto.
Ministerial Conference is the WTO’s top decision-making body and usually meets every two years. All members of the WTO are involved in the MC, and they can take decisions on all matters covered under any multilateral trade agreements.
SIGNIFICANCE OF WTO
Enhancement of Global Commerce: By establishing binding regulations for the international trade of goods and services, the WTO has significantly contributed to the exponential growth in global trade activities. Since the WTO's inception, the real volume of international trade has increased by approximately 2.7 times.
Reduction of Trade Barriers: The institution of the WTO has seen average global tariffs decline by nearly half, dropping from 10.5% to 6.4%, which has spurred the expansion of international commerce.
Economic Growth for Member States: Joining the WTO has resulted in a substantial and enduring increase in the national incomes of numerous developing countries.
Emergence of Global Value Chains: The stable and predictable trading environment fostered by the WTO, coupled with advancements in communication technology, has facilitated the development of global value chains. These chains now represent nearly 70% of the total global merchandise trade.
Poverty Alleviation: The principles of free and equitable trade promoted by the WTO have played a role in reducing global poverty rates. With the World Bank's extreme poverty line set at $1.90 a day, the percentage of people living in extreme poverty has decreased from approximately 33.33% in 1995 to about 10% in recent years.
PERSISTING ISSUES
Increase in Protectionist Measures: The implementation of trade barriers by developed nations has significantly impacted global trade, affecting approximately $747 billion in global imports and leading to delays in business investments due to uncertainty.
Dispute Resolution Impasses: The WTO's dispute resolution mechanism has been hindered by disagreements over reforms, particularly the Appellate Body's functioning. Instances such as the United States blocking the appointment of members in 2019 have effectively frozen the WTO's ability to adjudicate global trade disputes.
Abuse of Special and Differential Treatment (S&DT): The provisions intended to support developing countries through agricultural and industrial subsidies have been exploited by some developed nations. This misuse, facilitated by the self-declaration method of determining developing country status, has led to trade imbalances, with countries like South Korea and China benefiting from undue advantages.
Preference for Plurilateral Agreements: There is a growing trend towards forming plurilateral agreements, such as the TPP (Trans-Pacific Partnership), which often benefit developed countries due to their stronger negotiation positions. This trend undermines the WTO's consensus-based approach, sidelining developing countries' interests.
Consensus Challenges on Reforms: Achieving consensus on necessary WTO reforms has proven difficult. Developing countries advocate for the rationalization of fisheries subsidies and support for their public stockholding programs. Conversely, developed countries prioritize issues like e-commerce regulation, leveraging their technological advantages, while sidelining previous commitments.
WAY FORWARD
Proposal for Operational Improvements: India has put forward the "30 for 30" initiative, aiming to implement at least 30 operational enhancements at the WTO by January 1, 2025. This includes a cooling-off period before appointing diplomats to any role, prioritizing the resolution of longstanding issues, and creating a time-bound plan to improve the accessibility of the dispute settlement process for developing nations.
Establishment of New Trade Rules: There is a call for consensus-based agreements on new trade areas such as e-commerce and investment facilitation to enhance trade efficiency and predictability in modern sectors.
Enhanced Trade Inclusivity: Strategies should be developed to facilitate the participation of women and small businesses in global trade, aiming to create a more inclusive trading environment.
Depoliticizing the Dispute Settlement Process: The process for appointing members to the dispute settlement body should be insulated from political influence, and the dispute resolution mechanism itself should be reformed, including expanding the Appellate Body and enhancing its resources.
Transparency and Fair Veto Use: The WTO needs to clarify the guidelines for the use of veto power, ensuring it aligns with the collective interest and the organization's goals, alongside promoting transparency by encouraging members to openly share information about their subsidies.
The future of the WTO hinges on its ability to navigate complex global trade challenges through comprehensive reforms and consensus-building among its members. This adaptability will be crucial in maintaining its relevance and effectiveness in the evolving international trade landscape.
PRACTICE QUESTION
Q: Examine the challenges faced by the World Trade Organization (WTO) amidst the evolving global economy. What measures would you suggest to address them? (250 words, 15marks)
