Why in NEWS
The escalation of unilateral tariff measures by the US has renewed global discussions on the efficacy and future of the World Trade Organization (WTO), raising concerns over the diminishing role of the multilateral trading system in resolving trade disputes and ensuring fair competition.
Key Terms / Concepts
| Term | Definition |
|---|---|
| World Trade Organization (WTO) | Established in 1995 under the Marrakesh Agreement, it governs trade in goods, services, and intellectual property, providing a multilateral platform for trade negotiations. |
| GATT | General Agreement on Tariffs and Trade, predecessor of the WTO focusing on goods. |
| TRIPS | Trade-Related Aspects of Intellectual Property Rights. |
| TRIMS | Trade-Related Investment Measures. |
| Agreement on Agriculture (AoA) | WTO agreement regulating agricultural trade, subsidies, and market access. |
| Multilateralism | System where three or more countries cooperate on common issues under shared rules and institutions. |
WTO’s Role in Global Trade
| Aspect | Details |
|---|---|
| Platform for Negotiation | Facilitates multilateral trade agreements, e.g., Trade Facilitation Agreement 2013. |
| Trade Liberalization | Promotes tariff reduction, Most-Favored-Nation principle, and rules-based trading environment. |
| Transparency & Monitoring | Ensures accountability via Trade Policy Reviews, subsidy notifications, and reporting. |
| Capacity Building | Assists weaker economies through Aid-for-Trade and technical programs. |
| Aligning Trade & Development | Links trade policies with sustainable development, food security, and climate goals. |
| Preventing Protectionism | Acts as a referee during crises, e.g., monitoring export restrictions during Covid-19. |
Challenges Limiting WTO Effectiveness
| Challenge | Explanation |
|---|---|
| Dispute Settlement Paralysis | Appellate Body non-functional since 2019 due to US blocking judge appointments. |
| Negotiation Deadlock | Doha Round collapsed over agriculture, subsidies, and market access disputes. |
| Rise of Regional Trade | FTAs, bilateral pacts, and blocs weaken multilateral trade vision. |
| Protectionism | Unilateral tariffs using GATT Article XXI erode trust in WTO rules. |
| Evolving Trade Dimensions | Struggles to address digital trade, e-commerce, climate-linked barriers, and green technologies. |
| Development Disparities | Ambiguity in defining “developing country” allows self-designation, causing disputes. |
Key Reforms to Strengthen WTO
| Reform | Details |
|---|---|
| Revive Rule-Based Dispute Resolution | Restore Appellate Body with strict timelines while respecting domestic policy space. |
| Enhance Transparency | Strengthen Trade Policy Review Mechanism and encourage data sharing among members. |
| Institutional Partnerships | Cooperate with IMF, World Bank, UNCTAD, and climate bodies for integrated trade governance. |
| Permanent Reform Mechanisms | Create WTO Reform Council with rotating leadership to sustain reform momentum. |
| Address New-Age Trade | Establish rules on digital trade, cross-border data, industrial policy, and green subsidies. |
India’s Role in Multilateral Trade Governance
| Role | Details |
|---|---|
| Champion of Global South | Represent developing nations on food security, subsidies, and fair market access. |
| Balanced Liberalization | Advocate for calibrated trade liberalization respecting developmental needs and resisting protectionism. |
| Sustainable & Inclusive Trade | Promote climate-just trade, resist green protectionism (e.g., EU CBAM), and showcase initiatives like Mission LiFE. |
| Model Economy | Demonstrate integration of manufacturing (PLI), digital economy (UPI), and services for global trade example. |
Importance of Multilateralism
| Feature | Explanation |
|---|---|
| Rule-Based Order | Agreements and institutions create predictable frameworks, e.g., WTO rules. |
| Inclusivity | Involves developed, developing, and least-developed nations. |
| Shared Responsibility | Collective action on global challenges like climate, pandemics, and trade disputes. |
| Global Public Goods | Cooperation on transnational issues like oceans, cyberspace, and environment. |
| Examples | UN (political/security), WTO/IMF/World Bank (economic), Paris Agreement (climate/environment). |
In a nutshell
The WTO remains the cornerstone of global trade, promoting cooperation, predictability, and equitable growth. Despite challenges like dispute settlement paralysis, rising protectionism, and regional trade proliferation, timely reforms and enhanced cooperation can revitalize the WTO, ensuring it adapts to modern trade realities and maintains its central role in multilateralism.
Prelims Questions
- Which of the following is true about the WTO?
A) It was established in 1986 after the Uruguay Round
B) It covers trade in goods, services, and intellectual property
C) It has 194 members representing 100% of world trade
D) India joined WTO in 2000 - Which of the following has limited the WTO’s effectiveness recently?
A) Revival of Appellate Body
B) Doha Development Round collapse
C) Strengthened Trade Policy Review Mechanism
D) Expansion of multilateralism - India can promote equitable trade at WTO by:
A) Supporting unilateral tariff hikes
B) Championing Global South concerns
C) Ignoring SDG-linked trade policies
D) Restricting digital trade frameworks
Mains Questions
- Examine the challenges faced by the WTO in the current global trade environment and suggest reforms to strengthen multilateral trade governance. 15 Marks
- Analyse India’s role in promoting equitable and sustainable trade within the WTO framework. 10 Marks
Prelims Answers & Explanation
| Q.No | Answer | Explanation |
|---|---|---|
| 1 | B | WTO governs trade in goods, services, and intellectual property; established in 1995. |
| 2 | B | Collapse of Doha Development Round, among other factors, has limited WTO’s effectiveness. |
| 3 | B | India can champion Global South concerns to promote fair and equitable trade. |
