Recently, In a meeting of the WTO Dispute Settlement Body, the United States reaffirmed that it will not support the reappointment of a judge to the already understaffed WTO Appellate Body.
• The U.S delegation said at a meeting of the WTO dispute settlement body that it was not prepared to support the reappointment of Appellate Body member Shree Baboo Chekitan Servansing of Mauritius, whose term expires at the end of September.
Why US is Blocking Appointments:
• The US has accused the appeals panel of abusing its authority.
• US is unhappy about certain procedural issues and how some trade disputes have been resolved at the WTO.
• Many Dispute Settlement Body’s judgments has hindered imposition of anti-dumping duties and other trade restrictive measures on imported goods.
• There is also concern that China may be on its way to having a permanent seat in the dispute settlement body.
World Trade Organization
• Established in 1995.
• HQs: Geneva, Switzerland.
• Members: 164 nation states.
• WTO is the successor to the General Agreement on Tariffs and Trade (GATT) founded in 1948.
• The WTO is responsible for overseeing the rules of international trade.
• WTO decision-making happens at the Ministerial Conference, generally held every two years.
• There have been 11 such ministerial since the inaugural conference in Singapore in 1996.
• With a few exceptions, agreements reached at these conferences are made by consensus, meaning that all members must agree, and decisions are binding.
WTO’s Appellate Body:
• The Appellate Body of the WTO has 7 Judges and requires three members to decide a dispute.
• Currently, only four working members are serving office as of July 2018.
• If no appointment is made, the Appellate Body will virtually be destroyed by December 2019, with only one remaining member.
• Other WTO members are expressing concerns over the politicization of the Appellate Body appointment and reappointment process.
How Disputes are resolved in WTO?
• WTO’s power to settle disputes is what makes it more important than the earlier GATT.
• The main players in the Dispute Settlement Process of the WTO are:
• Dispute Settlement Body (DSB)
• Panel and Appellate Body
• WTO member countries party to the dispute
• WTO secretariat
• The parties approach the DSB regarding the dispute. If the dispute is not resolved through consultation at this stage, then the DSB orders the establishment of a Panel.
• The panel, normally consisting of three members appointed ad hoc by the Secretariat, receives written and oral submissions of the parties, on the basis of which it prepares a report for the DSB.
• The parties may appeal to the Appellate Body against the report of the Panel (but only on issues of law and legal interpretations developed by the panel).
• The Appellate Body may uphold, modify or reverse the panel’s legal findings and conclusions.
• The WTO dispute settlement rules states that an Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties, unless the DSB decides by consensus within thirty days of its circulation not to adopt the report.
What Role India can Play?
• India’s growing acceptance as an important nation in facilitating constructive deliberations among the countries with diverging interests must be capitalized to strengthen the WTO.
• India being a leader of G-77 (Group of Developing Countries) can bring major global trade countries on a table to resolve the bilateral and multilateral trade issues and restore the importance of WTO.
Importance of WTO for India:
• India has visibly benefitted from the open market reforms that it embraced in the early 1990s. Through WTO India can ensure and rule based global trade regime.
• The dispute settlement body of the WTO is important for India as India has appealed to it seeking exemptions from the import duties on steel and aluminium imposed by the US.
• The American Executive, in March 2018, imposed 25% tariff on steel and 10% tariff on aluminium imported from all countries except Canada and Mexico which is said to be against the global trade norms.
• India exports about $1.5 billion of steel and aluminium products to America every year.
• India is also involved with the US in other cases regarding disputes over poultry and Solar Cell/Modules and with China in cases regarding dumpling of USB flash drives and other items.
• India is seeking a permanent solution to its public stock holding issue because currently it is under the peace clause put in place at the Bali Ministerial meeting (2013) by which India continues to undertake stockholding of food grains equal to 10% of the value of its food production for meeting its food security requirement.
• Public stock holding is very important for India’s food security and if the issue is not settled, then it may have to roll back its Food Security Act.
• India harbors the ambition of becoming superpower and therefore need more and more platforms to take up the leadership roles as it has been doing at WTO.
• In the recently concluded ministerial conference at Buenos Aires, it successfully defended the interests of developing nations against the attempts of developed nations to subvert the agenda as agreed to under DDA.
• For India service sector continues to be its major strength and will be the major beneficiary upon the conclusion of the Trade Facilitation Agreement (TFA) in services as proposed by India.
• Article IX of the WTO Agreement provides for decision-making by consensus. WTO traditionally has been resolving disputes through consensus.
• If members are unable to convince the US to change its position, they can come together and vote to resolve the issue, as a last resort.
• With the increased tendency of nations to move towards bilateral and regional trade negotiations, it becomes all the more important to keep the WTO process going and also make the multilateral institution stronger so that a rule-based global trade is ensured and bilateral issues have an effective platform for resolution.
Do You Know?
• Trade war is an economic conflict between two or more nations regarding trade tariffs on each other.
• This type of conflict usually arises because the nations involved are trying to improve imports or exports for its own country.
• The last time the world saw trade war was in the 1930s when countries had tried to boost their trade surplus. The result was a massive slowdown around the world, which eventually resulted in the Great Depression of the 1930s.
Trade War Timeline:
• January 2018: US imposes new tariffs on imported solar products which was directed towards China.
• March 2018: US imposed higher tariffs to discourage the import of steel and aluminium which majorly affected EU countries, India and China.
• April 2018: China issues new increased tariffs on $2.4billion US goods imported in the country.
• June 2018: US implements 25% tariff on $50 billion of Chinese goods.
• June 2018: China retaliated tariffs on $50- billion worth in American goods imported in the country.
• June 2018: The European Union also imposed tariffs on $3.3 billion of American goods.
• June 2018: India imposed tariffs as high as 50% on a list of 30 goods imported from the US.
• July 2018: US threatened China that it will impose increased tariffs on $200-billion worth of Chinese imports.
• August 2018: China officially files two complaints with the WTO against the United States, in response to increased tariffs.
WTO on Trade War:
• Roberto Azevêdo, the group’s director-general warned nations that strong trade growth could be “quickly undermined if governments resort to restrictive trade policies, especially in a tit-for-tat process that could lead to an unmanageable escalation.”