WTO reforms and India’s challenging position

Understanding WTO reforms and India’s challenging position

Dr Sunitha Raju deliberates on the WTO’s work programme post-pandemic, the dilemma of diverse concerns of developing nations, and India’s role in addressing challenges.

Under the changing geopolitical landscape, many countries are resorting to unilateral measures to address trade disputes. This has challenged WTO’s role in addressing trade conflicts. During the pandemic, many members of the global trade body resorted to export restrictions on medical supplies, PPEs and later vaccines.

These measures directed at firm or industry level, used by countries at varying levels, can distort international competition and pricing. Similarly, subsidies deployed to address climate change issues will also affect international competition. Tax-subsidy policies are challenging issues for international cooperation, especially with conflicting interests in areas like taxation on digital services, data privacy regulation, localization and business orientation towards net zero targets.

Global governance, therefore, has to recognize the need for international cooperation to deal with issues like digital trade, investment facilitation, regulatory cooperation, climate-trade linkages and implement reforms to make WTO an effective forum for trade cooperation. This recognition should form the basis for the agenda of WTO reform.

CONTROVERSIES IN WTO WORK PROGRAMME

1. Special and Differential

Treatment (S&DT): S&DT is a core principle of WTO, which ensures a balance between developed & developing countries by providing concessions in enforcement and compliance with rules. While the principle isn’t being challenged, the lack of criteria in defining developing countries is at the core of the entire controversy.

WTO has adopted UN criteria for categorizing LDCs, but developing countries are defined on the basis of ‘self-declaration’. In NAMA (Non-Agricultural Market Access) negotiations, the US has challenged the developing country status of China, India and Brazil and in 2019 submitted a memorandum on this issue, suggesting criteria to be adopted for defining developing countries.

While it is credible to define developing countries on the basis of sound criteria, it is also important to recognize the heterogeneity in development issues across these countries. As such, the Single Undertaking Principle may not be appropriate to address their diverse development challenges.

For example, on the basis of aggregates, India’s GDP is third largest in the world (on PPP basis) but ranks 122 on GDP per capita. Similarly, there are many metrics where this fallacy is evident for India. It is, therefore, important for

India to focus on sectors that need support under S&DT and provide market access in developed sectors.

2. Rule Making Through

Consensus: The WTO governance model of ‘Consensus’ decision making has often resulted in deadlocks due to wide differences between developed and developing countries. This has reduced its effectiveness and also led to repercussions like members shifting to bilateral and regional trade cooperation and the rising significance of Plurilateral Agreements. Further, operations of WTO have also been constrained by ‘Consensus’ decision making. For example, the appointment of Director General of WTO was blocked by the US and S. Korea in 2020 and the current crisis in appointment of judges to the Appellate Body is also a fall out of this.

While the member-driven consensus approach is important, it should be applied mainly for substantive rules that apply to specific trade related policies. Other approaches can be explored for contentious policies/issues like domain-specific plurilateral agreements. When member stakeholders participate in plurilateral dialogues under the WTO platform and arrive at Agreements with provision for other members to join, this can emerge as a viable alternative for trade cooperation.

3. Transparency & Monitoring:

Member notifications are the main information used by WTO for deliberations in WTO committees and councils. The coverage gaps in these notifications are a reality.

Improvement in transparency requires access to complete & relevant information on policies affecting global trade and competition to understand trade dynamics and promote effective policy dialogues. WTO should promote cross notifications by countries and collaborate with multilateral organizations like World Bank, IMF, UNCTAD & ESCAP for data support. 4. Dispute Settlement: Adjudication of trade conflicts is an important function of WTO. Although there are criticisms on jurisdictional parameters, the non-functioning of Appellate Body since 2019 is a hurdle that needs to be overcome. Dialogue among members and building mutual trust is necessary for making the multi-year review of Dispute Settlement Process effective. The importance of first stage panel process and role of WTO bodies and Secretariat is important for de-politicizing dispute settlement mechanism.

INDIA’S POSITION

India has stood by the tradition of decision making by consensus and the commitment to development as core principles driving the multilateral trading system, and also considers S&DT as a non-negotiable right for all developing countries.

On the other hand, it must be reaffirmed that the body of developing countries is represented by members at different stages of development having diverse concerns and priorities, wherein drawing a common shared goal or mechanism would be difficult. The effort should be to address specific trade concerns of members and work on sectoral concessions through dialogue and build mechanisms to match S&DT provisions to these different needs. The Single Undertaking Principle may not be able to accommodate the diverse needs of developmental concerns of this group.

Second, the challenges posed by new areas emerging in global trade dynamics can have far reaching implications for these countries, particularly India. For example, cross border digital trade (e-commerce)

INDIA’S LEADERSHIP IN THE G-20 CAN BE PIVOTAL IN EXAMINING WORKABLE SOLUTIONS ON CRITICAL ISSUES

accelerated following the pandemic in both B2B and B2C engagements across countries. Leveraging this for building operational resilience and building businesses has brought into focus the need to keep pace with the changing technology frontier, building digital infrastructure, cyber security, skill development, regulation and international engagement.

The government’s role in these domain areas is critical and considering variations in development across countries, engaging in dialogue for designing mechanisms for better access is necessary. Countries have engaged in plurilateral discussions on this issue and India has not participated in these discussions. Considering the significance of e-commerce for India’s growth, this exclusion in global engagement can inhibit growth prospects.

And third, G20 has an important role in addressing the challenges of multilateralism and preserving the effectiveness of WTO system. With membership of both developed and developing countries, G20 can emerge as a dialogue platform for resolving controversial issues. With India poised to take over the Presidentship of the group, its leadership in facilitating coherent discussion in identifying differences and priorities and examining workable solutions will be important.

The Trade and Investment Working Group can engage with governments & business representatives and develop an approach for dialogue for controversial issues like S&DT, non-market economy, subsidies, SOEs & simultaneously work on mechanisms to cope with contingencies like the pandemic. The effort should be to facilitate WTO to engage in appropriate global trade governance.

Dr Sunitha Raju is Professor, Indian Institute of Foreign Trade and Member, Committee for Advanced Trade Research, Trade Promotion Council of India. Views expressed are personal.