The rise of bilateralism

Source: The post is based on the article “The rise of bilateralism” published in “Business Standard” on 3rd July 2023.

Syllabus: GS 2 Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

News: During Prime Minister Narendra Modi’s recent visit to the United States, six disputes between the countries at the WTO were withdrawn. While India has historically been committed to multilateralism in trade policy, there are indications that this commitment is not being implemented as strongly as before.

Why India historically pursued a multilateral trade policy?

Unlike plurilateral trade pacts, multilateral trading agreements do not distort trade.

Unlike bilateral-trade agreements, multilateral trading agreements like WTO empower even relatively small trading nations like India. (India’s share in world trade is very small when compared to its population or domestic output.)

Why should India not depend solely on bilateral trade agreements?

Bilateral deals are inherently unfair as stronger trading powers tend to dominate, leaving smaller nations vulnerable.

Relying on close strategic partnerships as the basis for good trade relations is unsustainable and unwise. Focus on bilateral agreements over multilateral rules exposes India to arbitrary shifts in trade policies, influenced by other country.

India dropped out of the Regional Comprehensive Economic Partnership and focused on trade deals with countries like Australia instead. This emphasis on free-trade agreements (FTAs) with developed-world partners has not yielded significant benefits. Even an India-EU FTA would not have the same impact as restoring the multilateral trading order.

What should be done?

The lack of judges in the WTO appellate body has made the WTO’s dispute resolution process powerless. India should persuade the US to drop its veto on the appointment of new judges to the WTO appellate body.