Trade multilateralism at risk 

Synopsis: About WTO’s crisis, various challenges faced by WTO and the way forward.

Introduction 

The World Trade Organization (WTO) is the global trade body. Currently, it is facing a serious existential crisis. The upcoming WTO ministerial meeting which will be held in Geneva, provides an opportunity to save this institution. 

What crisis WTO is facing today? 

The crisis is related to the vacancies in the Appellate Body of the World Trade Organization (WTO).

The Appellate Body (AB), the highest instance of the WTO dispute settlement, is part of the WTO’s dispute settlement mechanism. Since December 2019, the AB has stopped functioning due to rising vacancies. It has led to an increase in number of pending appeals.

Over the years, the U.S. has consistently blocked the appointment of AB members resulting in the present crisis.

The U.S. even rejected the proposal to find a solution to this and also denied the proposal of the European Union to establish an alternative interim appellate arbitration mechanism. With this, countries now have an option not to comply with the WTO panel decisions.

As the Appellate Body is unable to hear new appeals, no disputes can now be resolved at the highest instance, causing widespread concern in the context of escalating global trade protectionism. 

What are the challenges that WTO currently faces?

On public stock holding: WTO failed to find a solution of public stockholding for food security purposes as decided in 2015 Nairobi meeting. This is a concern for countries like India that use Minimum Support Price (MSP)-backed mechanisms to procure food grains. The WTO rules allow countries to procure, stock and distribute food. However, if such procurement is done at MSP that is higher than the external reference price, then the budgetary support provided shall be considered trade-distorting and is subject to an overall cap. With rising prices and the need to do higher procurement to support farmers and provide food to the poor at subsidised prices, India might breach the cap. Countries have agreed that legal suits will not be brought if countries breach the cap. 

Waiving TRIPS agreement for COVID medical products: The WTO member countries continue to disagree on the need of waiving the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement for COVID-19 related medical products. This waiver would increase the accessibility of COVID-19 medical products, including vaccines.  

Regulation of irrational fishing subsidies: WTO is close to signing a deal on regulating irrational subsidies provided for fishing. These subsidies have led to the overexploitation of marine resources by countries like China. This deal should provide a balance between conserving ocean resources and the livelihood concerns of millions of marginal fishermen.  

Plurilateral agreements: The deadlock at the WTO has led to the emergence of mega plurilateral trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) agreement. These plurilateral agreements not only hamper the global governance on international trade but also push the multilateral order to the danger. 

What is the way forward? 

On public stock holding: In long term, we need to find a permanent solution such as not counting MSP as trade-distorting. 

On TRIPS waiver: The WTO needs to adopt a waiver in the upcoming ministerial meeting. 

On regulation of fishing subsidies: India and other developing countries should insist on an effective special and differential treatment provision that requisite policy space.

On plurilateral agreements: We need rule based global order. Institutional multilateralism is the remedy to unilateralism and economic nationalism.  

Despite many flaws, WTO is the only forum where developing countries like India can push for evolving an inclusive global trading order. 

Source: This post is based on the article “Trade multilateralism at risk” published in The Hindu on 7th October 2021.