Major issues with the WTO: A requiem for the WTO

Source: The post major issues with the WTO has been created, based on the article “A requiem for the WTO” published in “Business standard” on 4th April 2024.

UPSC Syllabus Topic: GS Paper 2- Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

News: The article discusses challenges facing the World Trade Organization (WTO), including issues with China’s trade practices, dispute settlement problems, and rising protectionism. It also mentions the shift in global trade dynamics, the impact of regional agreements, and India’s role in world trade.

What are the major issues with the WTO?

Main Challenges:

China’s Designation: China continues to be classified as a “developing economy” despite being a major global trader. This status is a point of contention.

Unfair Trade Practices: China’s use of state-owned enterprises with subsidies is viewed as giving it an unfair advantage in global trade.

Rising Protectionism: There’s a global trend towards protectionism, impacting the effectiveness of the WTO.

Dispute Settlement System:

Appellate Body Dysfunction: The WTO’s appellate body, crucial for resolving trade disputes, is not functioning properly due to the U.S. blocking appointments.

Alternative Mechanisms: The creation of the Multi-Party Interim Appeal Arbitration Agreement (MPIA) as an alternative dispute resolution mechanism highlights the WTO’s struggles. However, MPIA’s decisions aren’t binding for non-participants, illustrating limitations in resolving global trade disputes.

Impact of New Technologies and Current Events:

Technology’s Uncertain Impact: The potential effects of AI on service trade are still unclear.

Global Events Disrupting Trade: COVID-19 and the Ukraine war have led to supply chain disruptions, influencing a shift towards localized production and affecting commodity trade, such as the ongoing trade in Russian oil despite sanctions.

How has global trade evolved after the global financial crisis?

Doubling of Trade Volumes: Prior to the 2008 financial crisis, global trade volumes more than doubled, and global tariffs decreased.

Rise of Regional Agreements: Post-crisis, agreements like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) gained prominence.

Shift in Global Trade Dynamics: The U.S. and China are creating distinct trade spheres yet continue to trade with each other.

Changes in Manufacturing: There’s a trend of manufacturing moving away from richer countries and premature de-industrialization in developing countries, including India.

‘Slowbalisation’: A revival in trade, especially in services, post-2020 but at a slower pace compared to the pre-crisis era.

What was the outcome of the recent WTO Ministerial Conferences?

For information on 13th WTO Ministerial Conferences read Article 1, Article 2

What role does India play in global trade?

Growing Export Share: India’s share in world exports increased from 0.5% in 1990 to 2.5% in 2022, with a projection to reach about 4% by 2030.

Services Export Growth: Approximately half of India’s future exports are expected to be in the rapidly growing services sector.

Protection of Developing World Interests: India views itself as a defender of the interests of developing countries in the global trade arena.

Balancing Protectionism and Open Trade: Despite a growing domestic protectionist lobby, India’s long-term interests align with a more open global trading system.

Exploring Free-Trade Agreements: India is considering free-trade agreements with major economies like the UK, EU, and potentially the US, to enhance its trade prospects.

Question for practice:

Examine the major challenges facing the World Trade Organization (WTO) and how global trade dynamics have evolved after the global financial crisis.