Date: 05/05/2023

Relevance: GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests; Important International institutions;

Relevance: GS-3: Effects of liberalization on the economy; Issues related to direct and indirect farm subsidies and minimum support prices

Key phrases: World Trade Organization (WTO), bilateral trade partnerships, principles of equity, transparency, marginalisation of smaller economies, effectiveness of the dispute settlement, Asian Development Bank

Context:

• Recently Union Finance Minister Nirmala Sitharaman while speaking at a seminar organised by the Asian Development Bank in Seoul, South Korea, said that the voice of developing nations was not being heard at the World Trade Organisation when compared to developed economies, whether on specific issues such as agriculture exports or on trade in general.

Challenges posed by newer trade blocs

• Numerous countries have pursued bilateral trade partnerships to secure their national economic interests, preferring to disengage from the WTO’s multilateral framework. Similarly, regional trade agreements, such as the European Union (EU), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the African Continental Free Trade Area (AfCFTA), have also proliferated in recent years.
• These trade partnerships promote regional integration and deepen economic ties among member countries outside the WTO’s purview.
• Though these economic partnerships and regional trade agreements do facilitate increased and targeted market access and reduced tariffs, these have potential negative impacts on smaller economies, the regionalisation of global trade rules, trade diversion, exclusion of non-member countries, and the overall incoherence in international trade law.
• The rise of bilateralism and regional blocs, thus, challenges the multilateral trading system and undermines the principles of equity, transparency, and effectiveness that the WTO embodies.

This growing trend to opt for bilateral, trilateral, multilateral, and regional trading mechanisms indicates the increasing mistrust of countries in the global trading system established under the WTO.

Reforms and reshaping the global order

• A multifaceted yet cohesive and concerted approach to resolving its myriad issues, including transparency in operations, dispute resolution mechanism, and reliable negotiating processes is required.
  • WTO reforms must ensure developing countries have a significant say in decision-making processes and that their concerns over issues like cultural subsidies, intellectual property, etc. are adequately addressed.
  • Strengthening the interlinkages between multilateral organisations will be instrumental in aligning the WTO’s mandate with broader global goals, such as the Sustainable Development Goals (SDGs), and promoting a more holistic and inclusive approach to international trade.
  • Collaboration and cooperation with multilateral institutions such as the United Nations and its specialised agencies will ensure a coherent and collaborative approach towards global economic governance.
  • A level playing field and equal opportunities to participate in global trade negotiations should be provided to all countries, regardless of their size and bargaining power. An equitable WTO will prevent the marginalisation of smaller economies and promote a more inclusive and fair global trade system.
  • This lack of transparency in decision –making process undermines the legitimacy of the WTO and erodes trust amongst its members. Transparency within the WTO will help the organisation regain greater acceptance and confidence as a multilateral institution based on transparency, good governance, and accountability to the changing realities of international trade.
  • By streamlining and improving the effectiveness of the dispute settlement process, the WTO can provide a reliable and efficient mechanism for resolving trade disputes, reducing the incentive for countries to resort to bilateral or regional agreements.
  • Delivering tangible outcomes in trade facilitation, services, and e-commerce, the WTO can demonstrate its relevance and effectiveness in addressing 21st-century international trade and imperatives.
  • Furthermore, the WTO should also consider incorporating environmental and social considerations into its rules and regulations. Climate change, labour standards, and sustainable development are critical global challenges that impact international trade.

Conclusion:

• Overall, the vision of the developed countries would make the WTO an instrument for unabashedly promoting their commercial interests, without any meaningful concern for the interests of the developing countries, who constitute the large majority of its membership.
• Such an outcome would not bode well for the survival of the multilateral trading regime. The process of WTO reform must keep development at its core, promote inclusive growth, and fully take into account the interests and concerns of developing countries.

Source: ORF-Online

Mains Question:

Q. The process of WTO reform must keep development at its core, promote inclusive growth, and fully take into account the interests and concerns of developing countries. Discuss (200 words).