[Answered] “The inability of the WTO to rein in global trade tensions has raised questions about its relevance in today’s world.” Examine.

The World Trade Organization (WTO) is the principal forum for setting the rules of international trade. In its two decades, it has helped reduce barriers to trade in both goods and services and created a dispute resolution system that has reduced the threat of trade wars. However, the institution is under considerable pressure. Disagreements over agricultural subsidies and intellectual property rights, separate bilateral and regional free trade agreements has reduced its effectiveness.

Relevance of WTO:

1. Administers signed agreements: It administers existing multilateral trade agreements, for example Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
2. Settles disputes and prevents trade wars:It settles disputes among its members through its Dispute Settlement Mechanism.
3. Manages new negotiations: It serves as a platform and manager for negotiations on new global trade agreements like Doha Round.
4. Rules-based multilateral trading system:WTO ensures that global trade is based on universal rules suited to and accepted across the world.
5. Stimulates global growth: By removing trade barriers it provides more markets to world’s resources thus stimulating global growth.
6. A global arbitrator: WTO functions as an arbitrator between warring countries and aims at building commonality in policies and practices.
7. Promotes standardisation: WTO and its members set standards of trade in goods, services and IP governance which reduces gaps between the quality produced and quality in demand.

Problems faced by the WTO are:

1. Dispute settlement cases continue to be filed for the time being and are being litigated.
2. Technical functioning is now wholly inadequate to meet the major challenges to the strategic relevance of the WTO in the 21st century. In critical areas, the organisation has neither responded, nor adapted, nor delivered.
3. Dimensions of its structures and functions are fragile, creaking, and failing in parts.
4. Agricultural and industrial subsidies have caused blockages in the system and prompted protectionist reactions in a number of WTO members.
5. The WTO lost the critical balance between the organisation as an institution established to support, consolidate, and bind economic reform to counter damaging protectionism, on the one hand, and the organisation as an institution for litigation-based dispute settlement, on the other hand.
6. The unilateral tariffs threatened by the U.S. and China on each other, in their ensuing trade war, don’t adhere to the WTO’s established procedures thus undermining its credibility.

What should be done?

1. Launch negotiations to address the intertwined issues of agricultural subsidies and market access, while recognising that food security concerns will not disappear.
2. A credible trading system requires a dispute settlement system that is accepted by all.
3. Launch serious negotiations to restore the balance.
4. GATT/WTO rules in a number of areas are outdated. New rules are required to keep pace with changes in the market and technology.
5. A reformed WTO will have to be constructed on the foundation of liberal multilateralism, non-discriminatory pillars.

Although WTO has many achievements in its name, WTO has failed in many fronts. It failed to build a consensus among developed and developing countries on important issues like agriculture, services trade and distorting subsidies by developed nations, as corroborated by the stalemate in Doha talks. WTO need to modify its vision in accordance with present challenges.