The Hindu Editorial Analysis- 5th March 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

The Quick Transformation of Russia-North Korea ties

Why in News?

In the middle of a series of actions that are fuelling tensions in the Korean peninsula, including the abandoning of the decades-long unification goal with Seoul, Pyongyang is quickly deepening its ties with Russia. The pace and the depth appear to have gained momentum since Russia’s invasion of Ukraine in 2022 which led to a strain in most of Moscow’s international ties.

Historical Division:

• The Korean Peninsula, previously unified, was split after World War II into two distinct entities: North Korea and South Korea.
• This division, stemming from conflicting ideologies influenced respectively by the Soviet Union and the United States, resulted in the devastating Korean War (1950-53).
• Despite the cessation of hostilities, the ideological and geopolitical disparities between North and South Korea persisted, shaping the modern geopolitical landscape.

North Korea's Nuclear Program:

• A focal point of international concern has been North Korea's relentless pursuit of nuclear capabilities.
• Despite numerous attempts at denuclearization, such as the 1994-2002 Agreed Framework with the U.S. and the six-party talks, North Korea has continuously advanced its nuclear program.
• Under the leadership of Kim Jong Un, North Korea has consistently conducted missile tests and enhanced its strategic capabilities, raising alarm globally.

Recent Developments:

• Tensions on the Korean Peninsula have escalated with Kim Jong Un's declaration of South Korea as an enemy state.
• North Korea has intensified its military actions, including a series of provocative missile tests, and showcased advancements in weaponry such as hypersonic weapons.
• South Korea, under the leadership of President Yoon Suk Yeol, has responded by bolstering military coordination with the U.S. and Japan, with a focus on deterring North Korean aggression.

Impact on Regional Security and Major Powers:

• The instability on the Korean Peninsula has broader implications for global conflicts involving major powers.
• North Korea's alignment with the China-Russia axis contrasts sharply with South Korea's position within the U.S. alliance system.
• Historical animosities and the involvement of nuclear-armed states further complicate the situation, heightening regional tensions.

North Korea’s Strategic Capabilities:

• North Korea's possession of a nuclear arsenal and its potential to target the U.S. mainland present a significant threat to regional and global security.
• The regime's advancements in missile technology and its capacity for cyber warfare contribute to the overall insecurity in the region.

Role of Ongoing Conflicts:

• Current global tensions, exemplified by the Russia-Ukraine conflict, indirectly influence the dynamics on the Korean Peninsula.
• North Korea's deepening ties with Russia and China, demonstrated through high-level visits and support, suggest a strategic alignment that could further complicate the situation.
• This alignment may be leveraged by these countries in their broader conflict with the U.S. and its allies, adding another layer of complexity to the regional dynamics.

Conclusion:

• The situation on the Korean Peninsula remains a critical concern for international security.
• The interplay of historical legacies, nuclear capabilities, and major power rivalries makes it a focal point for both potential conflict and diplomatic maneuvering, underscoring the importance of continued engagement and strategic foresight in addressing the challenges it presents.

Tepid Trade-Offs

Why in News?

The latest meeting of the World Trade Organization’s (WTO) apex decision-making body concluded late on Friday with precious little progress on key issues that affect global trade, despite extending deliberations by a day. To be clear, hopes for any significant outcomes from the 13th Ministerial Conference (MC13) in Abu Dhabi were not high to begin with.

The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.

The WTO has 164 members (including European Union) and 23 observer governments (like Iran, Iraq, Bhutan, Libya etc).

What are the Goals of WTO?

• Reduced Costs and Prices: By lowering trade barriers, the WTO facilitates cheaper imports, reducing production costs and ultimately leading to lower prices for finished goods and services. This results in a more affordable cost of living for consumers.
• Negotiation and Dispute Settlement: The WTO negotiates rules acceptable to all member countries and resolves disputes regarding adherence to these rules. This ensures fairness and compliance within the international trading system.
• Stimulating Economic Growth and Employment: The WTO's efforts in reducing trade barriers can stimulate economic growth and create employment opportunities, particularly through increased trade volumes and market access.
• Cost Reduction in International Business: Lower trade barriers facilitated by the WTO make conducting international business more cost-effective, benefiting companies engaged in global trade.
• Encouraging Good Governance: The WTO promotes transparency through shared information and knowledge, reducing arbitrariness and opportunities for corruption. This fosters good governance practices among member countries.
• Supporting Development: The WTO believes that open trade can boost economic growth and aid in the development of countries. Its agreements contain provisions that consider the interests of developing nations, thereby supporting their economic progress.
• Empowering Small and Weak Countries: The WTO provides a platform for small and weak countries to have a stronger voice in negotiations. Agreed rules, consensus decision-making, and coalition building narrow differences in bargaining power, ensuring that all countries, regardless of size, play by the same rules.
• Environment and Health: The WTO agreements aim to ensure that trade supports objectives such as environmental protection and public health. They prevent governments from using these goals as excuses for protectionist measures.
• Contributing to Peace and Stability: By discouraging protectionism and promoting policy predictability, the WTO contributes to global stability during economic turbulence. Trade rules increase certainty, deter sharp policy reversals, and build confidence in the multilateral trading system.

How did WTO came into Being?

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.

• 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.
  • 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.
  • 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.
    • The Havana Charter never entered into force, primarily because the U.S. Senate failed to ratify it. As a result, the ITO was stillborn.
  • 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:
    • to phase out the use of import quotas
    • and to reduce tariffs on merchandise trade,
• The GATT became the only multilateral instrument (not an institution) governing international trade from 1948 until the WTO was established in 1995.
• Despite its institutional deficiencies, the GATT managed to function as a de facto international organization, sponsoring eight rounds (A round is a series of multilateral negotiations) of multilateral trade negotiations.

Why WTO Replaced the GATT?

• Limited Institutional Structure: GATT was primarily a set of rules and multilateral agreements without a formal institutional framework to oversee its implementation and enforcement.
• Transition to WTO: GATT 1947 was terminated, and its provisions were preserved within the General Agreement on Tariffs and Trade 1994 (GATT 1994), which continues to govern trade in goods under the World Trade Organization (WTO).
• Coverage Gaps: GATT primarily focused on trade in goods and did not address trade in services or intellectual property rights comprehensively.
• Dispute Resolution: While GATT provided for consultations and dispute resolution mechanisms, its procedures lacked specificity. Parties could invoke dispute settlement articles if they believed another party's measures caused trade injury.
• Weak Dispute Settlement Mechanism: The lack of detailed procedures in GATT led to issues such as the absence of deadlines, delays in establishing dispute panels, and challenges in adopting panel reports. This weakness undermined the effectiveness of the dispute settlement mechanism under GATT.

What about the Cooperation between the WTO and the UN?

• Although the WTO is not a UN specialized agency, it has maintained strong relations with the UN and its agencies since its establishment.
• 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.
• The WTO Director General participates to the Chief Executive Board which is the organ of coordination within the UN system.

What is the Structure of Governance of WTO? 

Ministerial Conference:

• Topmost decision-making body of the WTO, convenes every two years.
• Comprises all WTO members, which include countries and customs unions.
• Authorized to make decisions on all matters under any of the multilateral trade agreements.

General Council:

• Highest-level decision-making body located in Geneva, meets regularly to execute WTO functions.
• Consists of representatives from all member governments and acts on behalf of the Ministerial Conference between its sessions.
• Also functions as the Trade Policy Review Body (TPRB) and the Dispute Settlement Body (DSB).

Councils Reporting to General Council:

• Council for Trade in Goods (Goods Council): Oversees WTO agreements related to trade in goods.
• Council for Trade in Services (Services Council): Manages WTO agreements concerning trade in services.
• Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council): Responsible for overseeing WTO agreements on intellectual property rights.

Trade Policy Review Body (TPRB):

• Operates under the General Council to conduct trade policy reviews of WTO members and analyze trade policy developments.
• Provides a platform for all WTO members to participate.

Dispute Settlement Body (DSB):

• Convenes under the General Council to address disputes between WTO members.
• Empowered to establish dispute settlement panels, refer matters to arbitration, adopt panel and Appellate Body reports, and monitor implementation of recommendations.
• Authorized to authorize suspension of concessions in cases of non-compliance.

Appellate Body:

• Established in 1995 under the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
• Comprises seven members appointed by the DSB for four-year terms.
• Hears appeals from panel reports in disputes brought by WTO members.
• Can uphold, modify, or reverse legal findings and conclusions of panels, with its reports being binding once adopted by the DSB.
• Headquartered in Geneva, Switzerland.

How has WTO Contributed to the World?

The World Trade Organization (WTO) is a key international organization alongside the International Monetary Fund (IMF) and the World Bank Group, playing a crucial role in international trade, global economics, and managing political and legal issues arising from globalization.

• Reducing Trade Barriers: The WTO is instrumental in reducing trade barriers between countries and facilitating market access, making it the most powerful institution for opening new markets and promoting global trade.
• Cooperation with IMF and World Bank: It collaborates with the IMF and World Bank to formulate cohesive global economic policies.
• Maintaining Peace and Bilateral Relations: By resolving trade disputes through negotiations, consultations, and mediations, the WTO contributes to maintaining world peace and fostering positive bilateral relations among member countries.
• Global Trade Rules: Decisions in the WTO are made through consensus among all members and ratified by their respective parliaments, leading to a more prosperous, peaceful, and accountable global economic environment.
• Trade Negotiations: The GATT and WTO have facilitated the creation of a robust trading system through rounds of negotiations. The Uruguay Round led to the creation of the WTO, while subsequent negotiations have expanded trade liberalization in telecommunications, information technology, financial services, agriculture, and more.
• Doha Development Agenda: Launched in 2001, the Doha Development Agenda aims to address various trade-related issues, including agriculture and services, to promote global development and reduce poverty.
• Recent Agreements: Significant agreements such as the Agreement on Trade Facilitation in 2013 and the expansion of the Information Technology Agreement in 2015 have further enhanced trade facilitation and eliminated tariffs on key products, promoting economic growth.
• WTO Agreements: The WTO's rules, largely the outcome of the Uruguay Round negotiations, cover various aspects of trade, with the General Agreement on Tariffs and Trade (GATT) being a cornerstone for negotiating lower tariffs and non-discriminatory trade practices. The GATT was later integrated into the WTO's framework as GATT 1994.

What about the Cooperation between WTO and India?

India, as a founding member of GATT 1947 and the WTO, participates in international trade governance to promote stability and predictability, fostering trade and prosperity.

• Services Sector: India's services exports constitute 40% of its total exports and contribute over 55% to its GDP, providing employment to around 142 million people. Key sectors include IT, travel, transport, and finance, with the US, EU, and other developed countries as major destinations.
• Liberalization of Services Trade: Since the Uruguay Round, India has autonomously liberalized its services trade regime, emphasizing the need for commercially meaningful access in developed countries.
• Food Security: Ensuring food and livelihood security is crucial for India's large agrarian economy. India advocates for a permanent solution on public stockholding subsidies at the WTO.
• Geographical Indications: India seeks higher levels of protection for products like Basmati rice, Darjeeling tea, and Alphonso mangoes, similar to that provided for wines and spirits under TRIPS.
• Inclusion of Non-Trade Issues: Developed countries' push for non-trade issues like labor standards and environmental protection in WTO agreements is opposed by India, fearing protectionist measures that could harm developing countries.
• Customs Duties on E-Transmission: India opposes the continuation of a moratorium on customs duties on electronic transmission, arguing it favors developed nations and has adverse effects on developing countries.
• E-commerce Discussions: India calls for intensifying the work program on e-commerce within the WTO framework, urging relevant councils and committees to engage in discussions based on their mandates.

What are the Concerns Associated with WTO?

In 2001, the World Trade Organization (WTO) launched the “Doha Development Agenda” to update trading rules, but consensus among the 150+ participating countries proved challenging.

• Negotiation Challenges: Getting over 150 countries to agree on terms posed a significant hurdle, unlike in previous rounds where exclusion threats could incentivize compliance.
• MC11 Outcome: The 2017 WTO Ministerial Conference in Buenos Aires ended without substantial progress due to failed consensus. The USA blocked solutions on government stockholding, leading India to adopt a tougher stance on issues like e-commerce and investment facilitation.
• Pressure Groups Formation: Developed countries, led by the US and EU, formed pressure groups within the WTO on e-commerce, investment facilitation, and MSMEs, with over 70 members each. This move deviated from the WTO's multilateral focus.
• TRIPs Controversy: WTO's strong defense of Trade-Related Intellectual Property Rights (TRIPs) has been criticized for prioritizing profit over public health, especially regarding access to life-saving medicines in regions like sub-Saharan Africa.
• US Role and TPP: The US, under the Obama administration, prioritized alternatives like the Trans-Pacific Partnership (TPP) over reviving WTO negotiations, aiming to contain competitors like Europe and China.
• Criticism and Challenges: The WTO's dispute settlement mechanism faces scrutiny, with the US blocking new Appellate Body members, Chinese mercantilism, US tariff measures, and disagreement on expanding disciplines to modern sectors.
• Transparency Issues: Lack of transparency in WTO negotiations, particularly regarding the definition of developed vs. developing countries and the self-designation practice, has sparked contention. China's designation as a developing country raised objections from several members.

What could be the Way Forward?

Since the WTO is consensus-based, reaching an agreement on reforms among all 164 members is extremely difficult. One possibility moving forward could be a plurilateral agreement with a group of like-minded countries on a new set of rules that serve as an addendum (supplement) to the broader WTO.

Conclusion

Today, the world is going through the protectionism, trade war (like USA & China), and Brexit making global economy squeezed. The role of WTO in future is very crucial to preserve global liberalised economic system evolved since the end of the 2^nd World War.

It is right time when countries like USA giving threat to withdraw from WTO making it dysfunctional, India and other emerging economies like Brazil, South Africa etc can provide a strong base for strong WTO with saving interests of developing countries.