[Editorial Analysis] Trade multilateralism at risk

Mains Paper 2: International Relations
Prelims level: World Trade Organization
Mains level: Important international Institutions


• The World Trade Organization (WTO) — the global trade body — is facing a serious existential crisis.

• The upcoming WTO ministerial meeting scheduled for next month in Geneva provides an opportunity to rescue this critical global institution from irrelevance.

About WTO:

• It is an organisation aiming to bind world trade into one single grand trade agreement which aims at formation of rules relating various aspects of trade: Goods, Services, IPR etc.

• The Marrakesh Agreement (1994) officially established WTO regime in 1995. during the heyday of neoliberalism, the WTO became a shining example of triumphant free-market capitalism.

• It is a successor to General Agreement on Trade and Tariff (GATT).

a. WTO is a permanent organisation, unlike GATT. It provides a continuing institutional mechanism that was lacking during the operation of GATT.

b. WTO was required because world trade was growing very fast; an agency was needed to monitor, regulate and supervise the international trade. GATT was unable to deal with the structural deficit.

Challenges with WTO:

• Critics of neoliberalism chastised the WTO for pushing the American imperialist agenda.

• Protectionism: Paradoxically, more than two-and-a-half decades later, the United States seems to have lost interest in it. The American view is that by failing to stem China’s rise and regularly indicting the U.S. in several trade disputes, it hasn’t served American interests.

• Vacancies: For example, in the Appellate Body (AB), which is part of the WTO’s dispute settlement mechanism. Since December 2019, the AB has stopped functioning due to rising vacancies. Over the years, the U.S. has consistently blocked the appointment of AB members.

• Primary motive of resolving trade disputes now abandoned: The U.S. also vetoes proposals to find solutions to this impasse, including stalling the proposal of the European Union to establish an alternative interim appellate arbitration mechanism. The number of pending appeals to the AB has increased sharply to around 20 cases. Countries now have an easy option not to comply with the WTO panel decisions by appealing into the void.

The existential challenges:

1. No solution to the public stockholding for food security purposes: This is of paramount concern for countries like India that use Minimum Support Price (MSP)-backed mechanisms to procure foodgrains. The WTO rules allow countries to procure, stock and distribute food. However, if such procurement is done at an market distorting price such as the MSP, then the budgetary support is subject to an overall cap. The 2015 Nairobi ministerial meeting made a clear mandate in this regard, however developed countries are not ready to follow it up.

• Regulating irrational subsidies provided for fishing that has led to the overexploitation of marine resources by countries like China, which is the largest catcher and exporter of fish. However, this agreement should strike a balance between conserving ocean resources and the livelihood concerns of millions of marginal fishermen. An effective special and differential treatment provision that accords adequate policy space is what India and other developing countries should insist on.

• Emergence of mega plurilateral trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — a treaty between 11 countries. Another key trade treaty is the Regional Comprehensive Economic Partnership (RCEP) agreement between Asian economies and countries down under. These plurilateral agreements not only fragment the global governance on international trade but also push the multilateral order to the margin, converting the WTO to what some call an “institutional zombie”.


• Prime Minister Narendra Modi, during his recent U.S. visit, rightly pleaded for a rule-based global order. Institutional multilateralism would be the ideal antidote to unilateralism and economic nationalism.

• Notwithstanding its flaws, the WTO is the only forum where developing countries like India, not party to any mega plurilateral trade agreements, can push for evolving an inclusive global trading order that responds to the systemic imbalances of extant globalisation.

• What is at stake is the future of trade multilateralism and not just an institution.


Prelims Questions:

Q.1) With reference to the offshore trusts, consider the following statements:
1. The Indian Trusts Act, 1882, gives legal basis to the concept of trusts.
2. India does not recognises offshore trusts.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer: A

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