US duty on steel, aluminium inconsistent with global trade norms

What’s in today’s article?

• Why in News?
• About WTO
• News Summary 

Why in News?

• In the cases brought by China, Norway, Switzerland and Turkey, a dispute panel of the World Trade Organization (WTO) has ruled that the US decision to impose customs duties on certain steel and aluminium products is inconsistent with the global trade norms.

What is World Trade Organization (WTO)?

• The Geneva-based 164-member WTO is a multilateral body which formulates rules for international trade (exports and imports) and adjudicates disputes between two or more than two countries on trade-related issues.
• It describes itself as a “member-driven”, “consensus-based” organization and is the world’s largest international economic organization representing over 98% of global trade and global GDP.
• It officially began operations on January 1, 1995, in accordance with the 1994 Marrakesh Agreement, thus replacing the 1948 General Agreement on Tariffs and Trade (GATT).

What is the organizational structure of WTO?

Image Caption: Organizational structure of WTO

• The highest authority of the WTO is the Ministerial Conference, which is composed of all member states and usually convenes biennially (every 2 years) and consensus is emphasized in all its decisions.
• The daily work is handled by three bodies whose membership is the same. The only difference is the terms of reference under which each body is constituted.

What is the Dispute Settlement Body (DSB) of WTO?

• It decides the outcome of a trade dispute on the recommendation of a Dispute Panel and possibly on a report from the Appellate Body of WTO.
• Appellate Body is a standing body of 7 persons that hear appeals from reports issued by panels, which may have amended the Panel recommendation if a party chose to appeal.
• Only the DSB has the authority to make these decisions, panels and the Appellate Body can only make recommendations.

News Summary:

• Background:
  • In 2018, the US imposed 25% and 10% import duties on certain steel and aluminium products, respectively, on the grounds of national security.
  • In retaliation, India had increased customs duty on a number of American products such as almonds, walnut, iron and steel items.
  • Bilateral consultation is the first step to resolve a dispute and if both sides are not able to resolve the matter through consultation, either can approach the establishment of a dispute settlement panel.
  • However, according to the sources, India is inclined to resolve the dispute with the US amicably and on mutually agreed terms.
• WTO ruling:
  • It does not find evidence that the measures were taken in time of war or other emergency in international relations.
  • The US needs to bring its WTO-inconsistent measures into conformity with its obligations under the GATT 1994.
  • However, the US has rejected the ruling, saying that there is an urgent need to fundamentally reform the WTO dispute settlement system.
• Significance of the ruling for India:
  • India had earlier stated that the US move has impacted exports of these products by Indian businesses.
  • As the country in 2018 too had approached the Geneva-based WTO against the US move, this ruling will help strengthen the Indian case too.

Q1) Who can file for dispute at WTO?

Only WTO Member governments can bring disputes to WTO. Private individuals or companies do not have direct access to the dispute settlement system at WTO.

Q2) What is the purpose of the General Agreement on Tariffs and Trade (GATT)?  

GATT was set up to eliminate protectionism, get countries trading freely among themselves, and help restore economic prosperity following the devastation of World War II.