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DAILY NEWS ANALYSIS

  • 06 November, 2021

  • 7 Min Read

WTO - A Complete Overview

Context: WTO is an important topic for UPSE Prelims and GS Paper2.

What is WTO?

  • The World Trade Organisation is an international organisation involved in the supervision and liberalisation of world trade.
  • It is the only international organisation that deals with the rules of international trade.
  • It became operational on January 1, 1995.
  • Unlike its predecessor, GATT (which only focuses on goods), it encompasses goods, services, intellectual property, and several investment policies.
  • There are more than 160 WTO members currently.
  • Their total international trade share is more than 90%.
  • The Ministerial Conference is the WTO’s decision-making body. The agreements reached in these conferences are made based on consensus (all members must agree) and these decisions are binding.

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  • The WTO Director-General is the organisation’s administrative head, who traditionally wield little power over the global trade regime since decisions are consensus-based.
  • Recently, Nigeria’s Ngozi Okonjo-Iweala became the first woman and first African to take up this position.

Objectives of WTO:-

The WTO has six key objectives:

  1. To set and enforce rules for international trade,
  2. To provide a forum for negotiating and monitoring further trade liberalization,
  3. To resolve trade disputes,
  4. To increase the transparency of decision-making processes,
  5. To cooperate with other major international economic institutions involved in global economic management, and
  6. To help developing countries benefit fully from the global trading system. Although shared by the GATT, in practice these goals have been pursued more comprehensively by the WTO.

Functions of WTO:-

  1. Administering WTO trade agreements
  2. Conducting forum for trade negotiations
  3. Handling trade disputes
  4. Monitoring national trade policies
  5. Providing technical assistance and training for developing countries
  6. Cooperation with other international organizations

History of WTO-

From the early days of the Silk Road to the creation of the General Agreement on Tariffs and Trade (GATT) and the birth of the WTO, trade has played an important role in supporting economic development and promoting peaceful relations among nations.

  1. The General Agreement on Tariffs and Trade (GATT) traces its origins to the 1944 Bretton Woods Conference, which laid the foundations for the post-World War II financial system and established two key institutions, the International Monetary Fund (IMF) and the World Bank.
    1. The conference delegates also recommended the establishment of a complementary institution to be known as the International Trade Organization (ITO), which they envisioned as the third leg of the system.
    2. In Havana in 1948, the UN Conference on Trade and Employment concluded a draft charter for the ITO, known as the Havana Charter, which would have created extensive rules governing trade, investment, services, and business and employment practices.
      1. The Havana Charter never entered into force, primarily because the U.S. Senate failed to ratify it. As a result, the ITO was stillborn.
    3. Meanwhile, an agreement as the GATT signed by 23 countries in Geneva in 1947 came into force on Jan 1, 1948 with the following purposes:
      1. to phase out the use of import quotas
      2. and to reduce tariffs on merchandise trade,
  2. The GATT became the only multilateral instrument (not an institution) governing international trade from 1948 until the WTO was established in 1995.
  3. So, the GATT became the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995.
  4. The Uruguay Round, conducted from 1987 to 1994, culminated in the Marrakesh Agreement, which established the World Trade Organization (WTO).
    1. The WTO incorporates the principles of the GATT and provides a more enduring institutional framework for implementing and extending them.
    2. The GATT was concluded in 1947 and is now referred to as the GATT 1947. The GATT 1947 was terminated in 1996 and WTO integrated its provisions into GATT 1994.
      1. The GATT 1994 is an international treaty binding upon all WTO Members. It is only concerned with trade in goods.

Why did WTO replace the GATT?

  1. The GATT was only a set of rules and multilateral agreements and lacked institutional structure.
    1. The GATT 1947 was terminated and WTO preserved its provisions in form of GATT 1994 and continues to govern trade in goods.
  2. The trade-in services and intellectual property rights were not covered by regular GATT rules.
  3. The GATT provided for consultations and dispute resolution, allowing a GATT Party to invoke GATT dispute settlement articles if it believes that another Party’s measure caused it trade injury.
    1. The GATT did not set out a dispute procedure with great specificity resulting in a lack of deadlines, laxity in the establishment of a dispute panel, and the adoption of a panel report by the GATT Parties.
    2. It made the GATT a weak Dispute Settlement mechanism.

The WTO and the United Nations (UN):-

  1. Although the WTO is not a UN specialized agency, it has maintained strong relations with the UN and its agencies since its establishment.
  2. The WTO-UN relations are governed by the “Arrangements for Effective Cooperation with other Intergovernmental Organizations-Relations between the WTO and the United Nations” signed on 15 November 1995.
  3. The WTO Director General participates to the Chief Executive Board which is the organ of coordination within the UN system.

Governance Bodies in WTO-

Ministerial Conference

  • The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years.
  • It brings together all members of the WTO, all of which are countries or customs unions.
  • The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.

General Council

  • The General Council is the WTO’s highest-level decision-making body located in Geneva, meeting regularly to carry out the functions of the WTO.
  • It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years.
  • The General Council also meets, under different rules, as
    • The General Council,
    • the Trade Policy Review Body,
    • and the Dispute Settlement Body (DSU)
  • Three councils, each handling a different areas of trade, report to the General Council:
    • The Council for Trade in Goods (Goods Council)
    • The Council for Trade in Services (Services Council)
    • The Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council)
    • As their names indicate, the three are responsible for the workings of the WTO agreements dealing with their respective areas of trade.
    • Again they consist of all WTO members.
  • The TRIPS Agreement:
    • sets the minimum standards of protection for copyrights and related rights, trademarks, geographical indications (GIs), industrial designs, patents, integrated circuit layout designs, and undisclosed information.
    • establishes minimum standards for the enforcement of intellectual property rights (IPRs) through civil actions for infringement, actions at the border,
      • and at least in regard to copyright piracy and trademark counterfeiting, in criminal actions.

The Doha Round

  1. The Doha Round is the latest round of trade negotiations among the WTO membership. Its aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules.
  2. The Round is also known semi-officially as the Doha Development Agenda as a fundamental objective is to improve the trading prospects of developing countries.
  3. The Round was officially launched at the WTO’s Fourth Ministerial Conference (MC4) in Doha, Qatar, in November 2001.
  4. The Doha Ministerial Declaration provided the mandate for the negotiations, including on following subjects:
    • Agriculture: More market access, eliminating export subsidies, reducing distorting domestic support, sorting out a range of developing country issues, and dealing with non-trade concerns such as food security and rural development.
    • Non-agricultural market access (NAMA): To reduce or as appropriate eliminate tariffs, including the reduction or elimination of high tariffs, tariff peaks and tariff escalation (higher tariffs protecting processing, lower tariffs on raw materials) as well as non-tariff barriers, in particular on products of export interest to developing countries.
    • Services: To improve market access and to strengthen the rules.
      • Each government has the right to decide which sectors it wants to open to foreign companies and to what extent, including any restrictions on foreign ownership.
      • Unlike in agriculture and NAMA, the services negotiations are not based on a “modalities” text. They are being conducted essentially on two tracks:
      • (a) bilateral and/or plurilateral (involving only some WTO members) negotiations
      • (b) multilateral negotiations among all WTO members to establish any necessary rules and disciplines
    • Trade facilitation: To ease customs procedures and to facilitate the movement, release and clearance of goods.
      • This is an important addition to the overall negotiation since it would cut bureaucracy and corruption in customs procedures and would speed up trade and make it cheaper.
    • Rules: These cover anti-dumping, subsidies and countervailing measures, fisheries subsidies, and regional trade agreements.
      • “Clarifying and improving disciplines” under the Anti-Dumping and Subsidies agreements;
      • and to “clarify and improve WTO disciplines on ?sheries subsidies, taking into account the importance of this sector to developing countries.
    • The environment: These are the first signi?cant negotiations on trade and the environment in the GATT/ WTO. They have two key components:
      • Freer trade in environmental goods – Products that WTO members have proposed include: wind turbines, carbon capture and storage technologies, solar panels.
      • Environmental agreements – Improving collaboration with the secretariats of multilateral environmental agreements and establishing more coherence between trade and environmental rules.
    • Geographical indications (GI): multilateral register for wines and spirits
      • Geographical indications are place names (in some countries also words associated with a place) used to identify products that come from these places and have specific characteristics (for example, “Champagne”, “Tequila” or “Roquefort”). Under the TRIPS Agreement, all geographical indications have to be protected at least to avoid misleading the public and to prevent unfair competition (Article 22).
      • This is the only intellectual property issue that is de?nitely part of the Doha negotiations.
      • The objective is to “facilitate” the protection of wines and spirits in participating countries. The talks began in 1997 and were built into the Doha Round in 2001.
    • Other intellectual property issues: Some members want negotiations on two other subjects and to link these to the register for wines and spirits. Other members disagree. Following these two topics are discussed:
      • GI “extension”- Extending the higher level of protection for geographical indications beyond wines and spirits.
      • Bio piracy, benefit sharing and traditional knowledge
    • Dispute settlement: To improve and clarify the Dispute Settlement Understanding, the WTO agreement dealing with legal disputes.
      • These negotiations take place in special sessions of the Dispute Settlement Body (DSB).
  5. With Doha Round seemingly adrift (directionless), the global Great Recession that began in the second half of 2008 led to fears that the world may face a wave of protectionism that the WTO would be powerless to prevent. Negotiations continued after the 2008 global financial crisis with low expectations.
  6. The 2013 Ministerial Conference (MC9) in Bali, Indonesia, delivered a significant achievement, the first multilateral agreement since the creation of the WTO.
    • This was the Trade Facilitation Agreement (TFA), which aims to speed up customs procedures and make trade easier, faster, and cheaper.
      • The TFA was only a small slice of the larger Doha agenda, but the successful deal was a cause for optimism.
    • The talks also reached an interim agreement (a peace clause) on “public stockholding” continuing exceptions that allow developing countries to stockpile agricultural products to protect against food shortages.
  7. 2015 Ministerial Conference Nairobi, Kenya (MC10) focused on a selected number of issues that are part of the Doha Development Agenda (DDA). The agreement was reached on the following DDA issues:
    • Stopping the use of subsidies and other schemes unfairly supporting agricultural exports
    • Ensuring that food aid for developing countries is given in a way that does not distort local markets
    • Seeking to simplify the conditions that exporters from the poorest countries have to meet so that their products benefit from trade agreements (so-called rules of origin)
    • Giving more opportunities for businesses from the poorest countries to provide services in the WTO's 164 member countries
  8. However, for many observers, Nairobi signaled the end of the Doha talks, a sentiment that intensified after the 2016 election of Trump.
    • President Trump made clear his preference for bilateral trade when he withdrew from the 12-country Trans-Pacific Partnership (TPP) shortly after taking office.
  9. In the 2017 Ministerial Conference Buenos Aires (MC11), the USA reflected the skepticism toward multilateralism when it blocked agreement on a draft ministerial declaration that would have “reaffirmed the centrality of the multilateral trading system and the development dimension of the organization’s work.”
    • Meanwhile, India, which has repeatedly threatened to block WTO agreements (including the Trade Facilitation Agreement) unless WTO members conceded to its demands on public stockholding for food security. India also toughened its stand on new issues including e-commerce and investment facilitation.
    • In the end, it was a relief to many that the United States did not actively seek to dismantle the WTO—as some had feared. But giving up its traditional leadership role could lead to a similar result, only more slowly.

WTO and India:-

  1. India is a founder member of the General Agreement on Tariffs and Trade (GATT) 1947 and its successor, the WTO.
    • India's participation in an increasingly rule-based system in the governance of international trade is to ensure more stability and predictability, which ultimately would lead to more trade and prosperity.
  2. Services exports account for 40% of India's total exports of goods and services. The contribution of Services to India's GDP is more than 55%.
    • The sector (domestic and exports) provides employment to around 142 million people, comprising 28% of the workforce of the country.
    • India's exports are mainly in the IT and IT enabled sectors, Travel and Transport, and Financial sectors.
    • The main destinations are the US (33%), the EU (15%), and other developed countries.
    • India has an obvious interest in the liberalisation of services trade and wants commercially meaningful access to be provided by the developed countries.
    • Since the Uruguay Round, India has autonomously liberalised its Services trade regime across the board.
  3. Ensuring food and livelihood security is critical, particularly for a large agrarian economy like India.
    • India is persistently demanding for a permanent solution on public stockholding subsidies at WTO.
      • At 2013 Ministerial Conference (MC9) in Bali, an interim agreement (a peace clause) was made on “public stockholding” continuing exceptions that allow developing countries to stockpile agricultural products to protect against food shortages.
  4. India strongly favours extension of higher levels of protection to geographical indications for products like Basmati rice, Darjeeling tea, and Alphonso mangoes at par with that provided to wines and spirits under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement.
  5. Developed countries have been putting pressure on inclusion of non-trade issues such as labour standards, environmental protection, human rights, rules on investment, competition policy in the WTO agreements.
    • India is against any inclusion of non-trade issues that are directed in the long run at enforcing protectionist measures (based on non-trade issues, the developed countries like USA and European Union are trying to ban the imports of some goods like textile, processed food etc.), particularly against developing countries.

What is WTO’s role during the pandemic?

  • Some of the key roles of WTO during the COVID-19 crisis are:
  1. Mitigating pandemic-led economic shock
  2. Helping coordination of nations’ trade policies
  3. Ensuring transparency to pandemic-related measures
  4. Monitoring member countries’ trade responses to the pandemic
  5. Reducing transaction cost of policy coordination among member countries
  • The advent of the COVID-19 outbreak saw supply chain disruption and trade restrictions on pharmaceutical products, food products etc.
  • Export restrictions were mainly to protect PPEs, pharmaceuticals, food, medical devices and COVID-19 test kits.
  • Such restrictions are not entirely against WTO norms.
  • WTO agreements supporting the public health response are:
  1. GATT, 1994 and GATS: Allows countries to impose trade restrictions for protecting public health and welfare
  2. TRIPS agreement: Allows members to have access to affordable life-saving drugs through various provisions like WTO-compliant compulsory licensing procedures (for costly, rare and patented drugs), voluntary licensing of patents and pooling of intellectual property for drugs and medical devices
  3. Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) gives members the right to impose trade restrictions for the protection of human, animal and plant life or health. Such restrictions should be backed by scientific evidence. If scientific evidence is insufficient, countries can adopt SPS measures based on available relevant information.
  4. Agreement on Technical Barriers to Trade (TBT Agreement) seeks to monitor technical regulations, standards and conformity assessment procedures so that they are non-discriminatory and hurdle-free.
  • Provisions under these agreements were used by countries to safeguard their citizens amid the COVID-19 crisis
  • Such legally valid measures led to severe shortages of food and pharmaceuticals in import-dependent countries.
  • In May 2020, WTO held a General Council meeting – the primary forum for international trade policy coordination. Discussions focused on COVID-19 responses and the long-term implications of the pandemic at the national and global levels.
  • WTO members emphasised the importance of keeping trade restrictions temporary, targeted, proportional and transparent.
  • The special meeting of the WTO’s Committee on Agriculture provided a forum for food import-dependent countries to voice their concerns about farm subsidies granted in response to the pandemic. This is of major concern for such countries since subsidies prevented their own producers to compete fairly in the global food market.
  • Members’ commitment towards the free flow of essential goods enabled the resilience of the global trade regime.
  • The WTO also provided a forum for enabling policy coordination with regards to intellectual property rights on COVID-19 vaccines.
  • Normally, WTO members must notify any quantitative trade restrictions for ensuring transparency.
  • This failed to take place amid the pandemic, with only a few members complying with the norm.
  • The WTO addressed this issue by
  1. Compiling a list of pandemic-related trade restrictions on goods, services and IPRs imposed by different countries for all stakeholders to access
  2. Maintaining informal situational report focusing on pandemic responses like state aids, government subsidies, the moratorium on default interest on late payments of customs duties etc.
  3. Informing about global supply chains of essential goods and services for reducing uncertainty caused by policy fluctuations
  • The Trade Policy Review (TPR) Mechanism (evaluates the adherence of members’ trade policies to trade norms) is used by the WTO to monitor the members’ pandemic response. This allows countries to question a specific member’s trade policies and assess whether the pandemic is used as an excuse to deviate from the WTO norms.
  • India’s TPR focused on government policies over the past 4 years, Atmanirbhar Bharat, tariff measures, deferred payments to the electricity sector and delays in the payment of various port charges.
  • Such measures taken amid the pandemic shows that WTO remains at the forefront despite various challenges faced by it.

What are the challenges faced by WTO?

Paralysis of dispute settlement mechanism:

  • The Dispute Settlement Body, consisting of all WTO members, is responsible for resolving dispute cases.
  • This body has the sole authority to set up ‘panels’ of experts to consider the dispute case and to accept/reject the panels’ rulings or results of an appeal based on the consensus of the members.
  • The panel’s ruling is heard by the three members of a 7-member Appellate Body set up by the Dispute Settlement Body.
  1. The Appellate Body members broadly represent the range of WTO membership
  2. Each member have a four-year term
  3. They are not affiliated with any government
  4. They are experts in the fields of law and international trade
  • The Appellate Body can uphold, reverse or modify the panel’s ruling.
  • The panel’s ruling is binding if Appellate Body does not overturn it and the mandated country must comply with it through compensation or by ceasing offending practice.
  • In case of non-compliance, the plaintiff country can retaliate through trade restrictions.
  • Yet, this elaborate process came to a grinding halt in December 2019 due to the dispute over the appointment of new judges to the Appellate Body.
  • The US repeatedly vetoed all proposed new judges.
  • The main reasons for Washington’s rejections are its concern towards Appellate Body’s functioning, overarching verdicts and its breach of sovereignty.
  • Other criticisms faced by the Appellate body are its slow response and its focus on issues not necessary to resolve disputes
  • Thus, the Appellate Body currently does not have the minimum number of members (three) required for the hearing appeals.
  • The consequences of this blockade are:
  1. The dispute settlement mechanism is powerless
  2. Countries are free to veto by appealing the dispute ruling to a non-functioning Appellate Body
  3. Future trade disputes have the potential to become mini trade wars
  4. WTO’s credibility is lost

Most Favoured Nation (MFN) Status:

  • MFN status is an economic position in which a country enjoys the best trade terms given by its trading partner.
  • This means that the country receives the lowest tariff, the fewest trade barriers and the highest import quotas.
  • All WTO members receive MFN status, leading to all receiving the same trade benefits as all other members.
  • However, developing countries are exempted.
  • The WTO rules allow countries to self-designate as developing countries to avoid committing to opening up of markets and to protect the domestic firms.
  • The US accuses India and China (developing countries) of using this provision despite being ranked by the IMF as the second and fifth-largest economies respectively at the global level.

Lack of consensus:

  • In its more than 25 years of existence, the WTO brought in just one new agreement covering its entire members – the 2013 Trade Facilitation Agreement (TFA).
  • This feat was achieved only because the developing countries were provided leeway with regards to their commitments.
  • The TFA enables the speeding up of customs procedures and easing of trade to make it faster and cheaper.
  • It is estimated that this could increase global trade value by around $1 trillion.
  • Such pluralistic agreements require years of negotiations, making it a slow and tedious process.

Protectionism:

  • Global supply chain disruption caused by the Great Lockdown caused a massive dislocation of global trade.
  • This underscored several countries’ arguments in favour of protectionist policies like high tariffs and stricter customs procedures.
  • Such protectionist policies reduced the relevance of the global trade regime and adversely impacted employment, economic growth, purchasing power etc., across the globe.
  • The main reason behind the lack of sound decisions on global trade amid the lockdown is the absence of trust between developed and developing countries.
  • Protectionist policies followed by countries like the US and the UK have created mistrust across the global community. This situation is exacerbated by the trade tensions between the US and China.

China:

  • China is often cited as an example of WTO’s failure.
  • WTO was not able to put a stop to China’s state-driven capitalism as well as its intellectual property offences (companies forced to share sensitive technologies before investing)
  • China designated itself as a “developing country” despite having several advantages in global trade.

TRIPS waiver:

  • India and South Africa, along with 57 members (mostly developing and least developed countries) are calling for a temporary waiver from certain provisions of TRIPS for prevention, containment and treatment of COVID-19.
  • The developed countries like the US, the EU, Switzerland and Japan are opposing this proposal.
  • These countries cite an adverse impact on the commercial interests of existing IP holders.
  • However, critics point out that these countries are shielding the powerful pharmaceutical companies from facing potential loss despite the same countries’ financial support for the research and development.
  • The TRIPS waiver is an existential threat to the current practice of treating medicines as a commodity.
  • Failure of consensus in this issue is the consequence of the global trade body’s fundamental structural problem.
  • Consensus-based decisions failed at bridging the gap between the developed and developing countries, leading to the persistence of discords and stagnation.

Deregulation:

  • WTO rules overrule national sovereignty, leading to the erosion of environmental and labour protections.
  • It is criticised for its stand on genetically modified crops, US dolphin-safe labelling etc.
  • It is also criticised for protecting unfair labour practices, violation of labour rights (China), wages etc., for lowering the cost of exports.

Import competition:

  • WTO-led tariff reductions hurt domestic jobs and wages due to increased dependence on imports and foreign firms.
  • For instance, since China entered the WTO in 2001, the US has lost more than 3 million jobs.

Failure of Doha Round:

  • At the 2001 ministerial conference in Doha, Qatar, the WTO members agreed to initiate new rounds of negotiations focusing on developing countries.
  • This came to be known as the Doha Development Agenda or the Doha Round.
  • The core aspects of the agenda include liberalisation of agricultural trade, reduction of trade barriers in the service sector and non-agricultural goods.
  • The majority of economically weak countries rely on agriculture exports for their growth. Yet they struggle due to developed countries’ support to their farmers with subsidies.
  • These negotiations collapsed in 2008 due to disagreements over agriculture subsidies and the proposed “special safeguard mechanism”, which suggested allowing developing countries to temporarily increase tariffs to protect their farmers.

What can be the way ahead?

Reforming WTO:

  • Many countries like Japan, the US and the EU are pushing towards the WTO’s reform.
  • Such reforms aim at strengthening the global trade body’s negotiating function, which has withered after the collapse of the Doha Round.
  • They also seek to further regulate the Appellate Body to safeguard sovereign rights.
  • It should be noted that developing countries are not involved in these negotiations.
  • This is a concern because such reforms will have serious implications for developing countries.
  • India can lead the way to ensure that there is inclusivity in the overhauled WTO.

Free Trade of medical goods:

  • The SDG 3 (good health and well-being) involves combating communicable diseases and providing access to affordable healthcare
  • International trade plays a vital role in this aspect since world imports of medical products are worth around $1.01 trillion (2019).
  • Around half of this value accounts for COVID-19 related products like medical supplies, medical equipment and technology, medicines etc.
  • While it is justifiable for countries to restrict vital commodities during a crisis, it disrupts the overall global response to the pandemic, leading to further slowing down of the revival process.
  • Reciprocal harms are inflicted while slapping tariffs since medical goods will become costlier and more difficult to access even in those countries imposing trade restrictions.
  • This is because no country is self-reliant when it comes to the manufacturing of medicines and medical equipment.
  • Thus, countries must cooperate towards the removal of existing trade barriers on medicines and medical supplies and prevent the enactment of further restrictions.
  • In this regard, the following measures need to be made enforceable under a WTO medical goods agreement, which should cover all members:
  1. Lift tariffs, export restrictions and non-tariff barriers on medical goods
  2. Remove avoidable regulations and administrative barriers to medical products’ trade
  3. Ease the movements of frontline workers

Ease of trade of environmental goods:

  • Liberalising environmental goods is critical for addressing the climate crisis.
  • Past instances of negotiations on removing/reducing trade barriers on environmental goods and services have failed due to a lack of consensus.
  • Key challenges faced by negotiators on liberalising environmental goods and services are:
  1. Uncertainty regarding the criteria of environmental goods and services. Past negotiations saw the inclusion of daily necessities like kitchen sinks and bicycles.
  2. Environment goods and services agreement must be dynamic for it to remain relevant for a long time. This requires the timely removal of trade barriers by signatories, which is challenging and nearly impossible.
  • Countries can consider the following solutions:
  1. Creating multiple lists – a core list (liberalised by all members within a specific deadline) and complimentary lists (countries allowed to choose goods and services for liberalisation)
  2. Set up a review mechanism representing all WTO members for periodically considering the steady stream of new products and criteria changes coming up in the market.

Fish subsidies:

  • Negotiations on fish subsidies initiated during the Doha Round.
  • The Doha Round sought to clarify and improve regulations on fish subsidies with due consideration to the importance of the sector for developing economies.
  • Fish subsidies regulation is pivotal for achieving SDG 14.6, which bans certain forms of fisheries subsidies that may contribute to overcapacity and overfishing, illegal, unreported and unregulated fishing.
  • The benefits of regulating fish subsidies are:
  1. Enables sustainability and higher returns
  2. Benefit artisanal fishing community in long term by providing stable jobs, increasing income and reducing poverty
  3. Improve global food security
  • The main hurdles during negotiations are:
  1. Developing countries calling for exemptions for small-scale fishermen.
  2. Eligibility criteria for special treatment
  • The global trade body can work towards enforcing an agreement that allows a transition period for the developing countries to implement sustainable fishing practices before prohibited subsidies are enforced.
  • This transition period can be used to enhance countries’ ability to monitor their fish stocks so that they can allow subsidised fishing in well-managed waters.

Investment regulation:

  • FDI inflow is critical for the growth of technology, trade, financial relationships and shaping supply chains.
  • The pandemic has reduced the global FDI by 42% last year.
  • It is estimated to further plunge by 5-10% in 2021.
  • While this is not because of the lack of multilateral investment rules, such regulations will ensure increased FDI inflow.
  • FDI rules are currently administered by thousands of bilateral investment treaties and other pacts consisting of investment provisions.
  • Such rules often cause conflicts and incoherence.
  • Currently, the WTO only has limited rules on investments under the Agreement on Trade-Related Investment Measures.
  • This agreement mandates treating of FDIs as national entities and bans quantitative restrictions on FDI.
  • Negotiations are currently underway for the implementation of the agreement on investment facilitation for development.
  • This agreement is in lines with the WTO Trade Facilitation Agreement.
  • Its objectives are
  1. Improvement of transparency and predictability in the global investment activities
  2. Streamline and hasten administrative procedures and requirements
  3. Boost international cooperation on exchanges of information, technology and experiences
  4. Prevent/address disputes
  • Measures to be taken to promote international investment facilitation agreement:
  1. Capacity-building of developing countries with technical assistance to enable them to participate in the negotiation process and implement the proposed agreement
  2. Inclusion of different categories of obligations within the agreement to enable equitable growth
    1. Easing market access for FDI without jeopardizing sovereignty of nations with regards to regulations on the environment, public health and safety.

Digital trade:

  • The WTO currently lacks digital trade-focused rules.
  • Many rules related to non-digital trade are automatically applicable to digital trade.
  • However, such rules are outdated and full of lacunae since they were enacted when the internet was at its nascent stage.
  • Current pressing issues pertaining to digital trade are:
  1. Data security is pushing countries towards data protectionism. Eg: data localisation laws, the Great Firewall of China etc.
  2. Companies forced to disclose software source codes by governments for privacy protection. Such policies force disclosure of trade secrets and go against the firms’ intellectual property rights
  • The lack of consensus led to around half of the WTO members becoming parties to non-WTO agreements on digital trade rules. Examples include:
  1. Comprehensive Progressive Agreement for Trans-Pacific Partnership (CPTPP)
  2. North American Free Trade Agreement or United States-Mexico-Canada Agreement (USMCA)
  3. Digital Economy Partnership Agreement (DEPA)
  • The future digital trade negotiations in WTO should focus on:
  1. Defining digital trade and related terms
  2. Authorising electronic signatures to validate online transactions
  3. Authorising cross-border paperless trade
  4. Enabling protection of e-consumers
  5. Mandating national-level rules and frameworks for e-commerce
  6. Regulating financial technology and Artificial intelligence
  7. Addressing the digital divide
  • The WTO can work towards modular arrangement as seen in the DEPA, which is signed between Chile, New Zealand, and Singapore. This agreement is structured to contain a dozen separate subject-specific categories on different matters related to digital trade.
  • When other countries join this agreement, they can accept different levels of commitment to each of these categories.
  • This enables at least a minimum level of commitments among countries on different aspects of digital trade

IP rights:

  • The issue with the TRIPS waiver can be addressed through licensed manufacturing.
  • This enables economically weak countries to have adequate supplies while also safeguarding intellectual property rights.
  • Licensed manufacturing is already being promoted by the member countries:
  1. AstraZeneca vaccine licensed to the Serum Institute
  2. QUAD countries are working towards financing agreements to boost India’s production of US-developed Novavax and Johnson & Johnson vaccines.

EDITORIAL- Charting a trade route after the MC12

An upbeat global trade scenario provides an ideal setting for Trade Ministers to correct iniquitous rules and provisions.

The World Trade Organization (WTO)’s 12th Ministerial Conference (MC12) is being convened in Geneva, Switzerland at the end of this month, a year-and-a-half after it was scheduled to be held in Kazakhstan (June 2020, but postponed due to the novel coronavirus pandemic). The MC12 is being held at an important juncture when the global trade scenario is quite upbeat.

The outlook

  • Recent WTO estimates show that global trade volumes could expand by almost 11% in 2021, and by nearly 5% in 2022, and could stabilise at a level higher than the pre-COVID-19 trend.
  • The buoyancy in trade volumes has played an important role in supporting growth in economies such as India where domestic demand has not yet picked up sufficiently.
  • Therefore, these favourable tidings provide an ideal setting for the Trade Ministers from the WTO member-states to revisit trade rules and to agree on a work programme for the organisation, which can help maintain the momentum in trade growth.
  • But above all, the MC12 needs to consider how in these good times for trade, the economically weaker countries “can secure a share in the growth in international trade commensurate with the needs of their economic development, an objective that is mandated by Marrakesh Agreement Establishing the World Trade Organization.

Does the run-up to the MC12 provide any evidence that the global trading system can be slightly less iniquitous than it has been?

  • The answer lies in the possible outcomes in some of the areas that are currently witnessing intense negotiations. These include the adoption of WTO rules on electronic commerce, investment facilitation, and fisheries subsidies.
  • But there is one issue that surmounts all others, namely, the WTO’s response to demands that technologies necessary for producing vaccines, medicines, and other medical products for COVID-19 treatment should be available without the restrictions imposed by intellectual property rights (IPRs).

IPRs and vaccine issue

  • From the very outset of the COVID-19 pandemic, it had become clear that IPRs protected using the provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) are formidable barriers to ensuring equitable access to vaccines.
  • Pharmaceutical companies controlling the global markets have used monopoly rights granted by their IPRs to deny developing countries access to technologies and know-how, thus undermining the possibility of production of vaccines in these countries.
  • The involvement of developing countries in vaccine production could have increased supplies of affordable vaccines to low-income countries. Availability of vaccines remains a critical problem in these countries even after a year since the first dose of the COVID-19 vaccine was administered. Recent statistics show that until now, a mere 4.1% of the population in low-income countries has received at least one dose of the vaccine.
  • To remedy this situation, India and South Africa had tabled a proposal in the WTO in October 2020, for waiving enforcement of several forms of IPRs on “health products and technologies including diagnostics, therapeutics, vaccines, medical devices … and their methods and means of manufacture” useful for COVID-19 treatment.
  • By doing so, barriers created by IPRs to timely access to affordable medical products could be removed. This proposal, supported by nearly two-thirds of the organisation’s membership, was opposed by the developed countries batting for their corporates.
  • However, after the Joe Biden Administration in the United States lent limited support to the India-South Africa proposal, there was a glimmer of hope that WTO members would agree to lift restrictions on access to technologies for COVID-19 vaccines and medicines; at least by the MC12.
  • The unfortunate reality of the current discussions is that an outcome supporting affordable access to COVID-19 vaccines and medicines looks distant.
  • Further confirmation of this possibly came from the WTO Director General, Ngozi Okonjo-Iweala, when in her recent musings on the MC12 in The Economist, she was completely silent on this issue.

Fisheries, e-commerce

  • Although discussions on fisheries subsidies have been hanging fire for a long time, there is a considerable push for an early conclusion of an agreement to rein in these subsidies.
  • However, the current drafts on this issue are completely unbalanced as they do not provide the wherewithal to rein in large-scale commercial fishing that are depleting fish stocks the world over, and at the same time, are threatening the livelihoods of small fishermen in countries such as India.
  • In recent months, the proposal by the members of the Organisation for Economic Co-operation and Development and the G-20 members to introduce global minimum taxes on digital companies has made headlines.
  • But in the WTO, most of these countries have been investing their negotiating capital to facilitate the expansion of e-commerce firms.
  • Discussions on e-commerce are being held in the WTO since 1998 after the adoption of the Ministerial Declaration on Global Electronic Commerce wherein WTO members agreed to “continue their … practice of not imposing customs duties on electronic transmissions”.
  • The more substantive outcome was the decision to “establish a comprehensive work programme” taking into “account the economic, financial, and development needs of developing countries”.
  • Fast forward to the discussions in 2021, and a key focus of the 1998 e-commerce work programme, namely “development needs of developing countries”, is entirely missing from the text document that is the basis for the current negotiations.
  • On the negotiating table are issues relating to the liberalisation of the goods and services trade, and of course guarantee for free flow of data across international boundaries, all aimed at facilitating expansion of businesses of e-commerce firms.
  • In fact, the decision on a moratorium on the imposition of import duties agreed to in 1998 has become the basis for a push towards comprehensive trade liberalisation — a perfectly logical way forward, given that the sole objective of the negotiations on e-commerce is to facilitate expansion of e-commerce firms.

Divisions over investment

  • Complementing the current focus of the WTO to promote the global interests of oligopolies is the initiative for the adoption of an investment facilitation agreement.
  • Inclusion of substantive provisions on investment in the WTO has been one of the more divisive issues. In 2001, the Doha Ministerial Declaration had included a work programme on investment, but it was soon taken off the table as developing countries were opposed to its continuation because the discussions were geared to expanding the rights of foreign investors through a multilateral agreement on investment.
  • An investment facilitation has reintroduced the old agenda of concluding such an investment agreement. The proponents have been careful not to load the agenda by seeking substantial commitments from the Government to promote the interests of foreign investors, but it should be clear even to the uninitiated that the ultimate objective is to bind host governments into a multilaterally agreed commitment to comprehensively protect investor interests.

One-sided negotiations

  • Besides the bias in favour of global oligopolies, the current negotiating processes in the WTO are fundamentally flawed. The negotiations on e-commerce and investment facilitation are being conducted not by a mandate given by the entire membership of the WTO in a transparent manner that are also consistent with the objectives of the WTO.
  • Instead, these negotiations owe their origins to the so-called “Joint Statement Initiatives” (JSI) in which a section of the membership has developed the agenda with a view to producing agreements in the WTO.
  • This will then be offered to the rest of the membership on a “take-it-or-leave-it” basis.
  • This entire process is “detrimental to the very existence of a rule-based multilateral trading system under the WTO”, as India and South Africa have forcefully argued in a submission against the JSIs early this year.

Way Forward

The world countries need to find a common consensus on the issues related to trade and others by effectively utilizing the multilateral platform.

Source: The Hindu


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