WTO and call for abolishment

WHY IN NEWS?

Recently, a US senator has called for the abolishment of World Trade Organisation (WTO), which has sparked much debate about the need of the international trade body.

WTO

• The WTO is responsible for overseeing the rules of international trade.
• It was established in 1995 and based in Geneva, Switzerland. It is the successor to the General Agreement on Tariffs and Trade (GATT).
• WTO decision-making happens at the Ministerial Conference, generally held every two years.
• Agreements reached at these conferences are made by consensus, meaning that all members must agree, and decisions are binding.
• Upon joining all members agree to a dispute settlement mechanism, in which WTO-appointed trade experts can render binding judgments.
• WTO rules are enforced by individual members, who can impose retaliatory trade sanctions on states that break them.
• Major functions:
  • Monitors the implementation of trade agreements.
  • Reducing tariffs as well as limiting quotas, subsidies, and other barriers to trade.
  • Serves as a forum for settling trade disputes between countries.

SIGNIFICANT AGENDA AND SUMMITS

• Doha Development Agenda
  • At the ministerial conference in Doha, Qatar, in 2001, WTO members agreed to a new round of negotiations that promised to put developing countries at the center. This became known as the Doha Development Agenda, or the Doha Round.
  • Liberalizing global agricultural trade was the linchpin of the agenda.
  • Many of the world’s poorest nations depend on exporting basic agricultural products but struggle to compete against richer nations that support their farmers with subsidies.
  • In 2008, negotiations collapsed due to disagreement over agricultural subsidies and a proposed ‘special safeguard mechanism,’ which would allow developing countries to temporarily raise tariffs to protect their farmers.
• Bali Ministerial Conference, 2013
  • Trade Facilitation Agreement (TFA), which aims to speed up customs procedures and make trade easier was concluded.
  • Interim agreement on ‘public stockholding,’ i.e. continuing exceptions that allow developing countries to stockpile agricultural products to protect against food shortages.

THE ARGUMENTS PUT FORTH FOR ABOLISHMENT OF WTO

• Even previous to the current debate on WTO, prominent figures from America have expressed their criticism of WTO being favourable to China and reason for the Chinese rise and increasing unemployment rates in America.
• Another main argument from the developed world is that although WTO has favoured the movement of capital and goods across borders so did the jobs. The jobs once these countries had was shifted and planted elsewhere across their borders were labour and capital requirement were cheap.
• The supporters of this claim also argue that the undermining authority of sovereign states and creation of supra-national institutions has eroded the global stature of their powerful nations in the international arena.
• They retierate that the peace and prosperity promised by such supra-national institutions never really came, but enriched nations like China.
• They also argue that China and India are permitted to receive preferential trade benefits as ‘developing nations’ at the World Trade Organization despite not being so.
• So far members have not been able to reach a consensus on vital issues like agricultural subsidies, food security, intellectual property rights and trade in services among others.
• Meanwhile, members have increasingly turned to separate bilateral and regional free trade agreements to advance their trade interests.
• They call for new rules and agreements with other free nations to bring back their dominance and presence in the global arena.

ARE THE ARGUMENTS VALID?

• The major point to be noted is that the so called 'supra-national institutions' are meant to promote and protect the interest of the nations alike. It is not meant to carry forward the hegemony and domination of superpowers.
• The policy decisions of nation-states are not diminished by WTO but it rather creates an arena for integrating such policy decisions with that of others in a less conflicting way.
• The goal of the WTO’s special preferences for ‘developing nations’ is to help poorer countries reduce poverty, generate employment and integrate themselves into the global trading system.
• The movement of capital and jobs outside a country is because other nations have been able to implement the demands of the institutions like WTO and reform their businesses and environment to attract the same.
• Trade liberalization helped make global supply chains possible, but it is not possible in anyway to argue that the WTO forced such developed nations to make changes in their policies. In fact, it was the nations like US that made major inputs in the systems on which WTO functions.
• The WTO made possible a rule-based order for trade, instated an automatic legal dispute settlement system for its members, and a mechanism to support the interests of developing economies, all of which still remains relevant.

WHAT SHOULD BE THE INDIAN STAND?

• India must closely watch for developments and should not hesitate to engage with that nations who seek for arrangements outside WTO, especially when nations are in look for changing their productions and supply chain outside the ambit of China due to their ire over the corona virus outbreak.
• It is more or less possible that almost all major economies including India will be drawn into this protectionist-liberalist contestations.
• A developing nation like India cannot undermine the relevance of an institution like the WTO. It has essentially enabled trade to be more free and is helpful in resolving disputes.
• Being a member of the organisations India can benefit from the trade relations with nations and can help in reducing conflicts, especially with China.

Practice Questions

Q. Is World Trade Organisation (WTO) losing its significance and relevance with the recent developments of protectionists and nationalists tendencies across the world. Substantiate.