US and WTO conflict- impact on the world - Seeker's Thoughts

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Friday, 21 September 2018

US and WTO conflict- impact on the world

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Since its establishment in 1995, the World Trade Organization (WTO) has been the focal point of a stable rules-based system guiding the conduct of world trade in goods and services.
WTO is facing existential crisis during a time when developed economies have adopted protectionist attitude.  That means that developed economies have closed the door for developing countries which will lead to the world into  a – lesser trade situation.
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US’s compliance with WTO decisions
In a dispute where US online gambling sites were noted to be GATS non-compliant, the US offered a $200 million settlement package to Antigua and Barbuda. However, it has only paid $2 million till now.  South Korea has stated that the US has not implemented the WTO ruling on South Korean washing machines, which again shows that US does not follow the WTO’s mandate.
There is a trade war between US and China despite both being a member of WTO. This negates the core non-discriminatory principle of WTO.
US and China have imposed counter-productive duties, accusing each other of harming their domestic interests. WTO has not been able to prevent the trade wars despite best efforts and has been labelled as a talk shop.
In taking unilateral trade action against China under Section 301 of the US Trade Act of 1974, the US gives up even the pretence of acting within the WTO framework
The “Overreaching”or judicial activism of United States. The US here tried to separate trade from development and objected to mention centrality for development at the preparation of the declaration.
The U.S. has systematically blocked the appointment of new Appellate Body members and de facto impeded the work of the WTO appeal mechanism. The institution is under great stress If no appointment is made, it will simply be destroyed by December 2019, with only one remaining member to tackle a massive number of disputes that are also increasingly hyper technical.
Impact of reduced importance of WTO on Developing Nation
    With the Appellate Body non-functional, the notification of the decision to appeal would mean that the process of dispute settlement will come to a standstill. If this happens, all the gains of the judicialisation of dispute settlement would be lost, and the WTO will revert to the GATT-era of resolving disputes essentially by means of negotiations. 
    US position of ‘America First’, and now slowly dismantling the working of the WTO system, will have long-term effects on global trade.
    Investment across borders is likely to get impacted.Capital flows might get impacted.Developing nations will have to negotiate mega regional trade deals to fill the void, the impact of which on the world economy is uncertain etc.

Conclusion
      -WTO needs to strengthen the dispute settlement mechanism as there are issues in appointment of judges in new appellate body.
       -WTO needs to enhance discussion mechanism by introducing wider consultations.        -It has been a long-standing complaint by the smaller participants that the consultations           or decision making is limited to the green room of DG of WTO.
      -There is a need of free tradeis required more by developing countries like India than            developed countries.
     -There is need for the structural reformin the WTO functioning as multilateral
trading system. Despite WTO being a democratic organization, there is a need to make
it more effective in protecting the interests of small nations against stronger countries. -The process of retaliation is ineffective and too impractical for smaller players.
So, developing countries must work collaboratively to strengthen WTO to collaborate effectively and learn from the past experiences when India and China led the developing countries in environmental forums, garnering funds in the form of GCF.

India’s Role
As the U.S. loses interest in multilateralism in trade, India should actively try to support the multilateral trade.
India should be more actively engaged to make the WTO a more equitable organisation.
India needs to work on persuading all members of the WTO to return to the table and negotiate on issues like agriculture, industrial tariffs, and services.
India’s positions have much in common with the African nations’ stand; we have to build bridges with Africa.
India needed to quickly forge a larger alliance to counter the moves that are against India’s interests.
India’s journey towards achieving 5 trillion dollar economy is not possible without expansion of our basket of global trade.
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