The Hindu Editorial Analysis- 25th April 2025 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Is World Trade Organization still relevant?

 Why in News? 

The editorial discusses the increasing irrelevance and credibility crisis of the World Trade Organization (WTO) in the contemporary global landscape. Once a key player in multilateral trade governance, the WTO now faces challenges such as institutional paralysis, a weakened dispute settlement mechanism, and its inability to address modern trade issues like the digital economy and climate change.

 WTO: Background & Core Functions 

• The World Trade Organization (WTO) was founded in 1995 as the institutional successor to the General Agreement on Tariffs and Trade (GATT).
• The WTO was tasked with creating a rules-based, transparent, and fair multilateral trading system, becoming a vital part of global economic governance.
• However, challenges like rising protectionism, institutional gridlock, and new trade issues related to digital and climate concerns are calling the WTO's relevance into question.

 Key Challenges Faced by WTO 

1. Dispute Settlement Crisis

• The Appellate Body, the WTO's top dispute resolution forum, has been inactive since 2019 because the U.S. has blocked the appointment of judges.
• This has rendered the Dispute Settlement Mechanism ineffective, weakening the enforcement of trade rules.
• As a result, countries are increasingly resorting to unilateral actions, bilateral retaliation, or seeking alternative forums for dispute resolution.

2. Resurgence of Protectionism and Trade Wars

• The trade war between the U.S. and China, along with various sanctions regimes and export restrictions, showcases a growing disregard for WTO norms.
• Member countries are violating key principles like Most Favoured Nation (MFN) and National Treatment, leading to a fragmented trade order.

3. Stalled Negotiations & Doha Round Fatigue

• The Doha Development Agenda, launched in 2001 to address the concerns of developing countries, has been stagnant for over twenty years.
• There has been no significant consensus on critical issues such as:
• Agricultural subsidies
• Fisheries subsidies
• Public stockholding for food security

4. Inability to Address Emerging Trade Domains

• The WTO currently lacks binding regulations on crucial areas like:
• E-commerce and data flows
• Digital taxation
• Green subsidies and carbon border adjustments

5. Marginalization of the Global South

• Developing countries feel that their interests are being overlooked within the WTO framework.
• There are concerns regarding the threat to Special and Differential Treatment (S&DT) provisions and the disproportionate influence of developed nations in setting the agenda.

 India’s Position and Concerns 

1. Support for Multilateralism

• India advocates for a rules-based multilateral trading system.
• However, this support is not at the expense of its developmental sovereignty and national interests.

2. Opposition to Premature Liberalization

• India has adopted a cautious approach towards issues like:
• E-commerce regulation
• Investment facilitation
• Moratorium on customs duties related to electronic transmissions

3. Protection of Agricultural Interests

• India strongly defends its Public Stockholding Programme, which is crucial for food security.
• It advocates for a permanent solution to this issue rather than a temporary peace clause.

4. Demands for WTO Reform

• India calls for a greater voice and representation for the Global South in WTO negotiations.
• There is a need for the democratization of agenda-setting and prioritization of negotiation issues to reflect the interests of developing countries.

 Implications for Global Trade Order 

1. Risk of WTO Becoming Redundant

• With the Appellate Body non-functional, the enforceability of WTO rules is compromised.
• This leads to a decline in confidence in the WTO's institutional authority and effectiveness.

2. Rise of Regional and Plurilateral Trade Blocs

• Trade agreements such as the Regional Comprehensive Economic Partnership (RCEP), Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and various digital economy agreements are starting to overshadow the WTO.
• This shift towards bilateral or minilateral trade arrangements contributes to the fragmentation of global trade governance.

3. Loss of Equity and Development Focus

• In the absence of the WTO's balancing role, developing countries may encounter asymmetric trade rules that do not cater to their needs.
• Critical issues such as climate justice, intellectual property waivers, and equitable market access remain unresolved, exacerbating inequalities.

 Way Forward: Making WTO Relevant Again 

1. Revive the Dispute Settlement Mechanism

• There is an urgent need to reach a consensus on appointing judges to the WTO Appellate Body to restore its functionality.
• Introducing procedural reforms can enhance the efficiency and effectiveness of the dispute resolution process.

2. Modernize the Negotiation Agenda

• The WTO should update its negotiation agenda to include contemporary issues such as digital trade, artificial intelligence, green goods, and climate-related tariffs.
• This modernization will make the organization more relevant in addressing current global trade challenges.

3. Protect and Reform Special and Differential Treatment (S&DT) Clauses

• It is crucial to ensure that S&DT clauses are respected and that developmental needs of countries are taken into account.
• Flexible frameworks like "graduated obligations" can be employed to provide necessary policy space for developing nations.

4. Enhance Inclusivity and Transparency

• The WTO should work towards giving smaller economies a more significant role in agenda-setting and decision-making processes.
• Increasing technical assistance and capacity-building efforts for least developed countries (LDCs) and developing nations will enhance their participation and benefit from the system.

5. Leverage India’s Leadership in the Global South

• India can play a pivotal role in advocating for development-oriented trade reforms through its leadership in groups like the G20, BRICS, and various WTO coalitions such as the G33.
• By promoting a development-focused agenda, India can help steer the WTO towards addressing the needs and concerns of the Global South more effectively.