World Trade Organisation (WTO) - 3 | Economics Optional Notes for UPSC PDF Download

Doha Round of WTO

• Doha Round Overview: The Doha Round represents the latest set of trade negotiations within the World Trade Organization (WTO), aiming for significant reform in the international trading system. The core objectives include reducing trade barriers and revising trade rules.
• Doha Development Agenda: Semi-officially known as the Doha Development Agenda, the focus is on enhancing trading prospects for developing countries.
• Launch of Doha Round: Officially launched at the Fourth Ministerial Conference (MC4) in Doha, Qatar, in November 2001.
• Doha Ministerial Declaration Mandate: The Doha Ministerial Declaration provided the mandate for negotiations on various subjects:
  • Agriculture: More market access, eliminating export subsidies, reducing distorting domestic support, addressing developing country concerns, and dealing with non-trade concerns such as food security.
  • Non-agricultural market access (NAMA): Aimed at reducing or eliminating tariffs and non-tariff barriers, particularly for products of export interest to developing countries.
  • Services: Focused on improving market access and strengthening rules, with negotiations conducted bilaterally/plurilaterally and multilaterally.
  • Trade Facilitation: Aimed at easing customs procedures to facilitate the movement and clearance of goods.
  • Rules: Covering anti-dumping, subsidies, countervailing measures, fisheries subsidies, regional trade agreements.
  • Environment: Addressing freer trade in environmental goods and enhancing collaboration with multilateral environmental agreements.
  • Geographical Indications (GI): Establishing a multilateral register for wines and spirits.
  • Other Intellectual Property Issues: Including GI extension, biopiracy, benefit-sharing, and traditional knowledge.
  • Dispute Settlement: Aimed at improving and clarifying the Dispute Settlement Understanding.
• Post-2008 Global Financial Crisis: The global economic downturn led to concerns about rising protectionism. Negotiations continued with low expectations.
• 2013 Bali Ministerial Conference (MC9): Marked a significant achievement with the Trade Facilitation Agreement (TFA), aiming to streamline customs procedures and make trade easier.
• 2015 Nairobi Ministerial Conference (MC10): Focused on selected DDA issues and achieved agreements on subsidies for agricultural exports, food aid, rules of origin simplification, and services opportunities for businesses in the poorest countries.
• Post-2015 and WTO Skepticism:
  • The 2016 election of Trump and the U.S. withdrawal from the Trans-Pacific Partnership (TPP) signaled skepticism toward multilateralism.
  • 2017 Buenos Aires Ministerial Conference (MC11) saw the U.S. blocking a draft declaration reaffirming the centrality of the multilateral trading system.
• India's Stand and Changing Dynamics: India's tough stance on issues like public stockholding for food security and resistance to new topics like e-commerce and investment facilitation.
• Uncertain Future: While the United States did not actively dismantle the WTO, its shift away from a leadership role raises concerns about the organization's future effectiveness.

How has WTO Contributed to the World?

• WTO in Global Economic Policy: The WTO, alongside the IMF and World Bank Group, plays a central role in formulating and coordinating world economic policy, addressing international trade, global economics, and legal issues arising from globalization.
• Powerful Institution for Trade Barriers: As the world's most powerful institution, the WTO focuses on reducing trade barriers between countries, fostering international cooperation, and opening new markets.
• Cooperation with IMF and World Bank: The WTO collaborates with the IMF and World Bank to create cohesiveness in global economic policies, ensuring a unified approach to economic challenges.
• Role in Peace and Bilateral Relations: Through resolving trade-related disputes, the WTO contributes to maintaining world peace and fostering bilateral relations among its member countries. This involves negotiations, consultations, and mediations.
• Global Trade Rules: Decisions within the WTO are typically made by consensus and ratified by members' parliaments, fostering a more prosperous, peaceful, and accountable economic world.
• Trade Negotiations and GATT/WTO Evolution: The GATT and WTO have played a vital role in creating a strong and prosperous trading system, with the Uruguay Round (1986-94) leading to the establishment of the WTO in 1995.
• Telecommunications Services Agreement (1997): In 1997, an agreement was reached on telecommunications services, involving 69 governments and encompassing liberalization measures that exceeded those agreed upon in the Uruguay Round.
• Information Technology Products (1997): In the same year, 40 governments successfully concluded negotiations for tariff-free trade in information technology products, and 70 members reached a financial services deal covering over 95% of trade in banking, insurance, securities, and financial information.
• Doha Development Agenda (2001): In 2000, talks began on agriculture and services, leading to the launch of the Doha Development Agenda at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001.
• Agreement on Trade Facilitation (2013): At the 9th Ministerial Conference in Bali in 2013, WTO members struck the Agreement on Trade Facilitation, aiming to reduce border delays by cutting red tape.
• Information Technology Agreement Expansion (2015): The expansion of the Information Technology Agreement at the 10th Ministerial Conference in Nairobi in 2015 eliminated tariffs on an additional 200 IT products, valued at over US$ 1.3 trillion per year.
• Intellectual Property Agreement Amendment (2017): In 2017, an amendment to the WTO’s Intellectual Property Agreement entered into force, easing access to affordable medicines for poorer economies. The same year saw the Trade Facilitation Agreement also enter into force.
• WTO Agreements - Result of Negotiations: The WTO's rules, known as agreements, result from negotiations between its members. The current set mainly stems from the 1986-94 Uruguay Round, which included a major revision of the original General Agreement on Tariffs and Trade (GATT).
• Goods Negotiations and GATT Evolution: From 1947 to 1994, GATT was the platform for negotiating lower tariffs and trade barriers. The GATT text outlined crucial rules, particularly on non-discrimination. After 1994, the WTO ratified the new, comprehensive, integrated GATT as GATT 1994.

What about the Cooperation between WTO and India?

• India's Participation in GATT and WTO: India, as a founding member of GATT in 1947 and its successor, the WTO, actively engages in a rule-based system to enhance stability and predictability in international trade, fostering increased trade and prosperity.
• Significance of Services for India: Services exports constitute 40% of India's total goods and services exports, contributing over 55% to the country's GDP. The sector employs approximately 142 million people, forming 28% of the national workforce.
• Key Sectors and Export Destinations: India's major exports include IT and IT-enabled services, Travel and Transport, and Financial sectors. Primary export destinations are the US (33%), the EU (15%), and other developed countries.
• Autonomous Liberalization of Services Trade: Since the Uruguay Round, India autonomously liberalized its Services trade regime comprehensively, aiming for meaningful access in developed countries.
• Focus on Food and Livelihood Security: India emphasizes the need for a permanent solution on public stockholding subsidies at the WTO to ensure food and livelihood security, particularly for its large agrarian economy.
• Interim Agreement on Public Stockholding (MC9, Bali): At the 2013 Ministerial Conference in Bali, India secured an interim agreement, or peace clause, allowing developing countries to stockpile agricultural products without facing trade disputes.
• Protection of Geographical Indications: India advocates for extending higher levels of protection to geographical indications (e.g., Basmati rice, Darjeeling tea, Alphonso mangoes) similar to that provided to wines and spirits under the TRIPS agreement.
• Opposition to Inclusion of Non-Trade Issues: India opposes the inclusion of non-trade issues such as labor standards, environmental protection, human rights, and investment rules in WTO agreements, fearing potential protectionist measures against developing countries.
• Customs Duties on Electronic Transmission (E-Transmission): India, at the 12th MC of WTO, opposed the continuation of a moratorium on Customs Duties on electronic transmission, highlighting its disproportionate favor towards developed nations.
• Call for Intensified E-Commerce Discussions: India urges the WTO to enhance the work program on the e-commerce sector, proposing discussions within relevant councils and committees, including the Council for Trade in Goods, Council for Trade in Services, and the Committee for Trade and Development.

What are the Concerns Associated with WTO?

• Doha Development Agenda Launch (2001): In 2001, WTO members initiated the "Doha Development Agenda" to modernize trading rules. The extensive effort to reach an agreement faced challenges due to the complexity of achieving consensus among over 150 countries.
• Negotiation Challenges: Unlike the previous Uruguay Round, where potential hold-out countries could be threatened with exclusion, this tactic was no longer effective. The challenge of consensus-building persisted.
• MC11 Buenos Aires (2017): The 2017 WTO Ministerial Conference in Buenos Aires ended without significant outcomes, with the USA blocking a permanent solution on government stockholding for food security. This led to India adopting a tougher stance, particularly on issues like e-commerce and investment facilitation.
• Formation of Pressure Groups: Developed countries, led by the US and the EU, attempted to address the WTO deadlock by forming pressure groups on e-commerce, investment facilitation, and MSMEs within the WTO. This move, involving over 70 members in each group, deviates from the WTO's multilateral focus.
• TRIPs Defense and Healthcare Concerns: The WTO's strong defense of 'Trade Related Intellectual Property' rights (TRIPs) has been criticized for prioritizing pharmaceutical companies' profit rights over global health. This has hindered access to life-saving medicines in regions like sub-Saharan Africa.
• U.S. Role in Doha Round Demise: The US, consciously or not, played a role in dismantling the Doha round by making excessive demands that no country was willing to meet. The Obama administration focused on alternative agreements like the TPP to counter Europe and China.
• Appellate Body Challenges: The multilateral system for settling trade disputes has faced scrutiny, with the US blocking the appointment of new Appellate Body members. This obstruction has effectively hindered the WTO appeal mechanism.
• Global Trade Dynamics: Factors such as Chinese mercantilism, aggressive US unilateral tariff measures, and the inability of WTO members to agree on expanding disciplines to new sectors have fueled criticisms of the WTO, reflecting changing dynamics in the modern economy.
• Transparency Issues: Lack of transparency is evident in WTO negotiations due to the absence of a defined classification for developed or developing countries. The self-designation as developing countries for 'special and differential treatment' has become a contentious practice, exemplified by China's status.
• Challenges to WTO Discipline Expansion: The inability to reach a consensus on expanding disciplines in crucial new sectors of the economy has intensified critiques of the WTO, highlighting challenges in adapting to evolving global trade dynamics.

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

• In the present era, the global economy is grappling with protectionist measures, trade conflicts such as the one between the USA and China, and the complexities of events like Brexit, all of which are putting immense pressure on the established liberalized economic system that emerged post-World War II. The significance of the WTO in the upcoming years becomes paramount as it plays a crucial role in safeguarding this global economic order.
• In the face of challenges, where influential nations like the USA are contemplating withdrawal from the WTO, potentially rendering it non-functional, there exists an opportune moment for countries like India, along with other emerging economies like Brazil and South Africa, to contribute significantly. By providing a robust foundation, these nations can play a pivotal role in reinforcing a strong and effective WTO, thereby protecting the interests of developing countries in the evolving global economic landscape.