WTO is Having an Existential Crisis

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Context

  • The 13th biennial ministerial meeting of the World Trade Organization (WTO) recently concluded amid much anticipation.
  • However, the meeting ended without substantial progress, leaving several critical issues unresolved.
  • So, it is crucial to assess the challenges faced by WTO member countries, focusing on the impasse surrounding public stockholding (PSH) programs, subsidies for industrial shipping fleets, and the dysfunctionality of the dispute settlement mechanism (DSM).

An Analysis of Points of Contention at the WTO Ministerial Meeting

  • Public Stockholding (PSH) Programs
    • One of the primary points of contention at the ministerial meeting was the debate over countries' rights to implement PSH programs, aimed at purchasing, stockpiling, and distributing food to citizens in need.
    • While acknowledging this as a sovereign right, WTO rules impose constraints, particularly regarding trade-distorting domestic subsidies.
    • The outdated assessment criteria, based on the average price of the base years 1986-88, pose challenges for countries like India, making it difficult to sustain PSH programs.
    • Despite the peace clause established in 2013, providing temporary legal immunity to India's MSP policy, efforts for a permanent solution were blocked at the recent meeting, largely due to opposition from agricultural exporting nations such as the US.
  • Subsidies for Industrial Shipping Fleets
    • Another critical issue left unresolved at the ministerial meeting pertains to regulating subsidies provided by industrialised nations to their shipping fleets, contributing to overcapacity and over-fishing (OCOF).
    • This practice has led to the depletion of fishing stocks, posing a severe threat to marine ecosystems.
    • Despite calls from countries like India for binding rules to curb these subsidies, the meeting failed to adopt any substantive measures, largely due to the influence of wealthier nations.
  • Dysfunctionality of the DSM
    • The breakdown of the DSM, a cornerstone of the WTO's regulatory framework, represents yet another setback highlighted at the ministerial meeting.
    • Since 2019, the DSM has been paralysed by the US's obstructionism, particularly in appointing members to the Appellate Body.
    • Despite reaffirmations of commitment to restoring a functional DSM by 2024, the prospects remain bleak, with the US showing no willingness to revive its previous form.

US Strategy and the De-Judicialization of Trade Multilateralism and Its Implications

  • Response to Geo-Economic Challenges
    • The US's stance within the WTO can be understood within the context of its response to emerging geo-economic challenges, notably the rise of China.
    • As China asserts itself as a dominant economic player on the global stage, the US perceives a need to recalibrate its approach to international trade governance.
    • By de-emphasising the role of international courts, particularly the Appellate Body of the WTO's dispute settlement mechanism, the US aims to assert greater unilateral control over trade policy decisions.
  • Reassertion of National Sovereignty
    • Underlying the US strategy is a broader narrative of reasserting national sovereignty in the realm of trade policy.
    • The proliferation of international trade agreements and the expansion of supranational institutions have raised concerns among certain segments of the US political establishment regarding the erosion of national autonomy.
    • By obstructing the functioning of the WTO's dispute settlement mechanism, the US seeks to reclaim decision-making authority and safeguard perceived national interests.
  • Critique of Judicial Overreach
    • The US's stance on the WTO's dispute settlement mechanism can also be interpreted as a critique of perceived judicial overreach.
    • Critics argue that international adjudicatory bodies, such as the Appellate Body, have exceeded their mandate and encroached upon the policy prerogatives of sovereign states.
    • By limiting the authority of these bodies, the US aims to rebalance the distribution of power within the WTO framework and prevent what it perceives as judicial activism.
  • Unilateral Response to Trade Imbalances
    • In addition to geopolitical considerations, the US's strategy within the WTO reflects a broader shift towards unilateralism in addressing trade imbalances and economic grievances.
    • The Trump administration, in particular, adopted a confrontational approach to trade relations, employing tariffs and other unilateral measures to assert US interests.
    • By undermining the effectiveness of multilateral dispute resolution mechanisms, the US retains greater flexibility to pursue unilateral trade actions without international oversight.
  • Implications for Global Trade Governance
    • The US's strategy of de-judicialization carries significant implications for the future of global trade governance.
    • By weakening the institutional mechanisms of multilateralism, the US risks exacerbating fragmentation and instability in the international trading system.
    • Moreover, the erosion of trust in the WTO's dispute settlement mechanism undermines the credibility of the institution, potentially leading to further challenges in resolving trade disputes and negotiating new agreements.

Ways Ahead for India Amid Challenges Within the WTO Framework

  • Diversification of Support Mechanisms
    • Rather than solely relying on PSH programs, countries can diversify their support mechanisms for farmers.
    • This may involve bolstering existing income support schemes, such as the Pradhan Mantri Kisan Samman Nidhi in the case of India.
    • By providing direct financial assistance to farmers, these schemes can help alleviate income volatility and mitigate the need for trade-distorting domestic subsidies.
  • Investment in Agricultural Infrastructure
    • Another alternative approach is to prioritise investment in agricultural infrastructure and technology.
    • By modernising farming practices, improving irrigation systems, and enhancing access to credit and markets, countries can increase agricultural productivity and competitiveness.
    • Moreover, investments in research and development can lead to the development of drought-resistant crops and sustainable farming techniques, reducing reliance on subsidies for income support.
  • Promotion of Sustainable Agriculture
    • Countries can also focus on promoting sustainable agricultural practices that prioritize environmental conservation and resource efficiency.
    • This may involve incentivizing farmers to adopt organic farming methods, agroforestry, and integrated pest management techniques.
    • By aligning agricultural policies with sustainability objectives, countries can enhance their resilience to climate change while complying with WTO rules on environmental protection.
  • Market Diversification and Value-Added Products
    • To reduce dependency on government support and mitigate the impact of trade restrictions, countries can explore opportunities for market diversification and value addition in agricultural products.
    • This may include the promotion of niche crops with high export potential, the development of food processing industries, and the establishment of agricultural cooperatives to enhance bargaining power in global markets.
    • By focusing on value-added products, farmers can capture greater value from their produce and reduce vulnerability to price fluctuations.
  • Strengthening of Agricultural Extension Services
    • A critical component of alternative approaches is the strengthening of agricultural extension services and farmer education programs.
    • By providing farmers with access to information, training, and technical assistance, countries can enhance their capacity to adopt innovative practices, improve productivity, and adapt to changing market dynamics.
    • Additionally, extension services can facilitate knowledge-sharing and peer-to-peer learning, fostering a culture of innovation and resilience within the agricultural sector.

Conclusion

  • The outcomes of the 13th WTO ministerial meeting underscore the deepening existential crisis facing trade multilateralism.
  • The inability to address critical issues such as PSH programs, subsidies for industrial shipping fleets, and the dysfunctionality of the DSM reflects broader systemic challenges within the WTO framework.
  • As countries grapple with increasing uncertainty and volatility in the global trading system, the imperative for meaningful reform and collective action becomes ever more pressing.

Q) What is the purpose of the World Trade Organization (WTO)?

The primary purpose of the WTO is to facilitate international trade by establishing and enforcing rules and agreements that govern global commerce, ensuring a level playing field for member countries and promoting economic growth and development worldwide.

Q) How does the World Trade Organisation resolve disputes between member countries?

The WTO resolves disputes through a structured dispute settlement mechanism. This mechanism involves consultations between the parties involved, followed by the establishment of a dispute settlement panel if necessary. The panel examines the case and issues a ruling, which can be appealed to the WTO's Appellate Body. Once the ruling is made, member countries are expected to comply with the decision or face possible trade sanctions.

Source: The Indian Express