The Hindu Editorial Analysis- 28th March 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

WTO’s investment facilitation negotiations are not illegal

Why in News?

The 13th Ministerial Conference (MC13) of the World Trade Organization (WTO) took place in Abu Dhabi, UAE, from February 26 to March 2. It saw the participation of 166 member countries.

• During the conference, a ministerial declaration was adopted. This declaration outlined a reform agenda aimed at strengthening the WTO's role in regulating global trade and facilitating smooth cross-border commerce.

About World Trade Organization (WTO)

• Establishment: The World Trade Organization (WTO) was established in 1995, taking over from the General Agreement on Tariffs and Trade (GATT).
• Objective: The primary aim of the WTO is to regulate international trade effectively.
• Headquarters: Situated in Geneva, Switzerland, the WTO operates from its headquarters.
• Members: Currently, the WTO has 164 member countries, with India being one of the founding members.

Objectives of WTO:

• Formulate rules for international trade to ensure fairness and transparency.
• Negotiate for further liberalization of trade policies among member nations.
• Settle disputes that may arise between member countries regarding trade practices.
• Provide assistance to developing nations to integrate into the global trading system.
• Collaborate with major economic institutions to foster global economic growth and stability.

Principles of WTO:

• Non-Discrimination: All member countries should be treated equally in trade matters.
• Most Favored Nation: Ensures that any favorable treatment granted to one country applies to all members.
• National Treatment: Foreign entities should be treated no less favorably than domestic ones.
• Reciprocity: Countries should offer equivalent trade advantages to each other.
• Predictability through Binding Commitments: Promotes stability and predictability in trade relations.
• Transparency: Encourages openness and information sharing in trade policies and practices.
• Encourage Development and Reforms: Aims to foster economic development and reforms globally.

Important Trade Agreements:

Several crucial trade agreements are under the purview of the WTO, including:

• Agreement on Agriculture (AoA)
• Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
• Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)
• Agreement on Technical Barriers to Trade (TBT)
• Agreement on Trade-Related Investment Measures (TRIMS)
• General Agreement on Trade in Services (GATS)

WTO Agreement on Agriculture (AoA)

• Negotiated during Uruguay Round in 1995
• Aims to reform trade in agriculture
• Allows support for rural economies with fewer trade distortions
• Focuses on improving market access, reducing subsidies, and eliminating export subsidies

Subsidies Types:

• Green Box – No distortion in trade
• Amber Box – Can distort production and trade (subject to limits)
• Blue Box – Subsidies linked to production-limiting programs

Most Favoured Nation Clause

Ensures non-discriminatory trade and prevents discrimination among trade partners. It is the first clause in GATT and special trade statuses are extended to all WTO members.

• Ensuring Fair Trade
• Preventing Unfair Discrimination
• Introduction to the General Agreement on Tariffs and Trade (GATT)
• Extension of Special Trade Statuses to all World Trade Organization (WTO) Members

Key Decisions Made at the 13th Ministerial Conference (MC13)

• Strengthening of the Dispute Settlement System: Member nations have reaffirmed their dedication to establishing a fully operational dispute settlement system by the year 2024.
• Enhancement of Special and Differential Treatment (S&DT): The focus was on maximizing the use of S&DT provisions to bolster the developmental goals of developing and least developed countries (LDCs).
• Strengthening of the Dispute Settlement System: Member nations have reiterated their commitment to establishing a fully operational dispute settlement system by the year 2024.

Challenges to the Multilateral Trading Order

• Rising Protectionism: Developed countries, facing increasing internal pressures, are leaning towards protective trade policies, which go against the established global trade system.
• Supply Chain Disruptions: Ongoing conflicts and trade sanctions have led to significant disruptions in global supply chains, highlighting the need to review trade standards for improved resilience and effectiveness.
• Development Disparities: There are persistent concerns about how nations are fairly treated in trade agreements, with a focus on reducing gaps between wealthier nations and Least Developed Countries (LDCs).

Let's delve deeper into each of these challenges:

Rising Protectionism

• Developed economies, such as the United States and European countries, are increasingly turning to protectionist measures to safeguard their industries from foreign competition.
• This can take the form of tariffs, quotas, or other restrictions on imports, making it harder for businesses in other countries to access these markets.
• For example, the trade tensions between the US and China have resulted in the imposition of tariffs on a wide range of goods, affecting businesses and consumers on both sides.

Supply Chain Disruptions

• Conflicts like trade wars and geopolitical tensions can disrupt the intricate networks that make up global supply chains, leading to delays, shortages, and increased costs.
• For instance, the COVID-19 pandemic exposed vulnerabilities in supply chains worldwide, especially in essential goods like medical supplies and electronics.
• Companies are now reconsidering their sourcing strategies and looking to diversify suppliers to mitigate such risks in the future.

Development Disparities

• The inequality in economic development between different countries poses a significant challenge to the fairness of global trade agreements.
• Less developed nations often struggle to compete on an equal footing due to factors like limited infrastructure, technology, and access to capital.
• Efforts to address these disparities include initiatives like preferential trade agreements and development aid to support the growth of disadvantaged economies.

India's Approach

• Public Stockholding (PSH) Programme: India supported a resolution regarding the PSH program, which plays a vital role in ensuring food security. This initiative facilitates the acquisition and distribution of necessary food grains to millions of people at subsidized prices.
• Fisheries Subsidies: India suggested implementing regulations on fisheries subsidies to assist impoverished fishermen operating in domestic waters. It also emphasized reducing subsidies for industrial fishing activities in international waters to promote sustainable practices.
• E-commerce Customs Duties: India advocated for the elimination of the moratorium on customs duties related to cross-border e-commerce. This stance aimed to protect revenue streams in the rapidly evolving digital trade environment.

Outcomes

• Agriculture: MC13 saw the development of a document addressing agricultural concerns, representing a significant achievement following years of discussions.
• Fisheries: Progress was made towards reaching a consensus on fisheries regulations, with the expectation of finalizing them by the middle of the year.
• E-commerce Duties: Despite endeavors, the extension of the exemption from customs duties for e-commerce transactions for an additional two years dismayed several developing nations.

Conclusion

• The results of MC13 highlight the necessity of collaborative endeavors to tackle critical challenges in global trade.
• While progress has been achieved in specific sectors like agriculture and fisheries, persistent issues related to e-commerce and development gaps remain unresolved.
• As countries navigate the changing trade environment, continuous dialogue and united efforts are crucial to promote comprehensive and sustainable economic development on a global scale.