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World Trade Organisation

Introduction
• WTO along with Brettonwoods insts forms the "Architectonic
edifice" of LIEO.
• It Deals with rules of trade b/w nations—to ensure smooth,
predictable & free flow of trade
• Est in 1995, as a successor of GATT.

Philosophy behind WTO

• Embodiment of Neo-liberalism (Washington Consensus) to est
LIEO-- Aims at Promotion of Free trade / Liberalisation of world
trade for-

o Promoting peace & prosperity-->Interdependences--> Richard

Cobden, Thomas Friedman's Golden Archer theory
o Immanuel kant said "Universal hospitality" is essential for
"Perpetual peace" in IP
o Development--> As world trade is based on Ricardo's theory
of "Comparitive advantage", so --More profits / Win-win
situation for all.

Need for est WTO in place of GATT

1. GATT dealt only with trade in Non-agri goods, but by

1980's Agri goods became imp component of external
trade.
2. Trade in services increased exponentially + new areas of
trade like IPRs emerged
3. After C.W-- Due to "SAP" & "Shock therepy"-- No. of
countries participating in external trade became too large.

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4. After C.W-- American Hegemony-- so WTO est as a

component of "Hegemonic stability theory"

Thus, an Inst framework needed to comprehensive Governance of

global trade.

• So, Uruguay Round of talks (1986-94) concluded with Marakkash

agreement based on "Dunkel-Draft"-- led to est of WTO.

Aims & Objectives of WTO

o To est Rule of law in Intl trade-- Est Rule based global trading
system
o Ensure free & fair trade + maintain T/P & Predictibility
o Peaceful settlement of Intl trade disputes
o Development of Devg countries

Principles Governing WTO Agreements (SP-NOT)

o Non Discrimination--> MFN status & National treatment
o Openness-- Reducing Tarrif & Non Tarrif barriers.
o T/P & Predictibility
o Special & Differential treatment

Evolution of WTO
• 1st Ministerial (1996- Singapore)-- Resulted in adoption of
"Singapore issues" (proposed by Devd countries)-- opposed by Devg

1. Trade facilitation
2. Govt procurement
3. Trade & investment
4. Competition policy

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• 3rd Ministerial (1999- Seattle)-- By this time Devg became

disillusioned, as WTO policies resulted into--

1. Disproportionately favoured Devd > Devg--> Devg didn't get

expected benefits + Dev of Under-dev.
2. Huge Inter-state & intra-state disparities
3. Devd although ↓ tarrifs but they erects many non-tarrif barriers
(SPS, TBT)-- so Devg lacks real market access.
4. Politics of "Boxes of subsidy"--> Food insecurity
5. Devg says they lack sufficient expertise to comprehend
technicalities of Trade laws

Hence Global civil society protests in Seattle that WTO Meeting couln't
took place.

• 4th Ministerial (2001- Doha)-- In Response of huge protests--

Devd realised that WTO shd address Developmental concerns-- So

o Adoption of Doha Dev agenda-- Considered as Victory of

Devg + Devd accepted it to show Global solidarity against
Terrorism (After 9/11)

• 9th Ministerial (2013- Bali)-- Adoption of "Bali Package"--

o Agreement on Trade facilitation

o Emergence of "Peace clause"--Till permanent solution
reached on Public stockholding on Food security, Devg can
give any amount of subsidy for their food prog.

• 10th Ministerial (2015- Nairobi)-- Resulted into "Nairobi

Package"--

o Peace clause extended

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o Decision to eliminate subsidies on Agri exports-- Devd to

comply immedietely (By 2016) & Devg given relaxed
deadline (By 2018)
o Special safeguard mechanism

• 11th Ministerial (2017- Buenos Aires)-- No conclusive agrrement

(No Joint declaration) as-- Devd proposed new agreement on e-
commerce while Devg insisted on first finishing negotiations on
DDA-- Thus virtually peace clause extended for indefinite period.

North-South Debate in WTO

Agricultural Negotiations (AoA)- Most contested & Most
politicised + it is a major issue in DDA
Negotiations r on 3 pillers--

1. Market access
2. Export subsidies
3. Domestic support

Importance of Agriculture for Developing countries

o "In devd Agri is just a matter of commerce, but in Devg it is a

way of life"
o Mainstay of their economy + major source of FOREX
o Very small size of Per capita landholding while very large in
Devd, In Devg- Subsistance farming but In Devd- Commercial
o In Devg- Around 70% Pop depends on Agri & 30% is GDP
share but in Devd- 4% pop & 3% GDP share
o S-E Dev, Poverty alleviation & Food security

Issues related to Market access-

• Deals with ↓ tarrif & Non tarrif barriers-- Devg continues to

maintain high tarrifs & Devd although ↓ tarrifs but they imposes

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Non tarrifs (SPS, TBT) & Anti dumping duties w/o T/P-- so Devg
not able to increase thier exports.
• Lack of consensus on 2 issues--

1. Special safeguard mechanism-- Lack on consensus on point at

which Devg can resort to this-- Devg like India r very defensive, but
Devd like US says it must be used only in case of substantial import
surge
2. Special Product- Devg can keep some products out of liberalisation
having links with rural dev, employ & livelihood-No consensus on
No. of items

Issues related to Export subsidies--

Resolved under "Nairobi Package"
Issues related to Domestic supports--

o Most controversial as Devd maintains huge subsidies but many

restrictions r placed on Devg-- Thus WTO policies adversely
impacted Agri, Food security-- so Agri is stagnating, Farm
suicides ↑, Malnutrition ↑
o Avg subsidies per farmer in India- $49, EU- $1068, USA-
$7253
o 3 "Boxes" of subsidies-- Blue, Green & Amber (Trade
Distorting as they r production enhancing-- so limitations
imposed based on Specail & Differential treatment called as
"de-minimis"-- 5% of total value of agri produce for Devd &
10% for devg)
o Values of produce is computed at base price b/w 1986 & 1988

Contentions (Devg's arguments)

1. Actual amount of subsidies given by Devd > Devg

2. Devg (like India) has to introduce FSA for their malnourished pop--
for that Remunerative price to be given to farmers-- hence their limit
will be breached & other countries can impose CVD.

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3. Devd has played with "Boxes" & channelised their subsidies from
Amber to green box but Devg lacked expertise so they could not
understand technicalities of agreement.

How WTO policies impacted Food security in Devg countries?

o Exposed their farmers to fluctuations in Global market +

Subsidies ↓
o Govt cannot release food even when they r getting rotten

Deceitfulness of Developed world

o They have surplus produce-- so want to export their cheap

food grains to Devg
o Purposefully kept subsidy bind at 1986-88 base price
o Manipulates price of Agri produce through Share market

Groups involved in Agri negotiations

o C-4 (Mali, Chad, Bukrina faso, Benin)

o G-20 (negotiating export subsidy)
o G-33 (negotiating public stockholding)

India's proposals

1. Change base price level to level that can take into A/C
inflation in Food items.
2. Keep public stockholding prog for food security in Green box
3. End the boxes & maintain one.

But Devd countries not agreeing to this.

Negotiations on NAMA--
• Devd ↓ tarrifs but imposes Non tarrif barriers, while Devg r reluctant
to ↓ tarrifs as custom duties r major source of revenue for them

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• Main parties in dispute r US & China-- US accuses china of

Dumping & China accuses US for imposing CVD in Non T/P
manner
• TFA was expected to solve this.

Debate on new issues-

• IPR
• Subsidies on fisheries
• e-commerce-- opposed by Devg due to security issues + can harms
MSMEs.

WTO & Developing countries

-ves
o Equal voting rights not benfitted them, as Devd uses potential
bargaining tools like "Green Room Diplomacy"
o DSM is too costly-- Devg cannot afford to use it, some Devg
countried r even closing their offices in Geneva
o -ve impact on Food security
o Devd continues to be Protectionist
o Rules of the game r not Fair

• Aurelie Walker (Article-- "WTO has failed Devg nations")--

o WTO membership has failed to deliver Pro-Dev changes + has

failed poors.
o Finding "Dev" in DDA today is like lookimg for a needle in a
haystack

+ves- Still WTO's success is in favour of Devg, if they r able to maintain

Solidarity

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o WTO is more democratic (Equal voting rights for all +

Consensus based decisions) unlike WB & IMFf which have
weighted voting.
o WTO agreements r based on Principle of Special &
Differential treatment
o WTO provides "Aid for trade" to Devg-- Can be used in
Capacity building.
o Multilateralism is in favour of Smaller Devg countries, as they
cannot get better bargain in Bilateral framework
o M.L very imp for India as there r very limited chances of
success of SAFTA-- so only through WTO India can get
favourable trade env w/o being bargained by smaller
neighbours.

Achievements of WTO
• Global Facilitation of Trade—By building binding rules, reducing barriers,
Resolving trade disputes, TFA
• Improved Economic Growth—Since 1995, value of world trade has nearly
quadrupled
• Increased Global Value Chains
• Upliftment of Poor Countries
• Global trade rules: Decisions in the WTO are typically taken by consensus among all
members and they are ratified by members’ parliaments. This leads to a more
prosperous, peaceful and accountable economic world.

Current issues in WTO—

Facing make or break moment—Backlash Against Glbl, free trade &
M.L (Crisis of Legitimacy)

• Faced challenges from very inception--Initial apprehensions raised

by Devg but present crisis comes from Devd world especially
USA—

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o US approach emerges from China’s unfair trade practices--

China’s State Capitalism
o US senator—Josh Hawley—suggested US to abandon
WTO—As it led to job loss in US
o Major controversy is lack of agreed definition Devd & Devg
country.

• Sharp division in interests (Diff Negotiating positions) of Global

north & south has marginalised WTO.

o DDA is at the core of divide as it is favourable for Devg but

Devd r working to jettison it in favour of a new agenda-- e-
commerce, investment facilitation, MSMEs
o Lack of agreement on public stockholding & subsidy regime
o West wants inclusion of issues like IPR, e-commerce, ,
investment facilitation, labour laws etc—staunchly opposed by
Devg world

• Great power rivalries-- US & China

• Side stepping WTO—Bilateral, regional & mega-regional deals—
TPP, RCEP, AU-FTA.

o Recent G20 Osaka summit witnessed Devd countries

supporting Japan’s attempt at legitimizing informal plurilateral
negotiation on digital trade.

• Growing protectionism—Trade war—WTO remained a moot

spectatore—? WTO’s credibility.
• Institutional Issues—AB is dysfunctional +DSM in the state of
deadlock.
• Limited success in major issues—Food security, Global trade
imbalances + since 2001 Doha talks- no substantial outcomes
• COVID-19 Impact & its global economic fallout

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Why US is strangulating Appellate Body by Starving funds + blocking

App process to AB?

o China’s growing assertiveness is reason for U.S.’s hard

posturing--> China has largely benefited from Rules-based
WTO & now it is distorting the rules
o US criticises it for “overreaching” or judicial activism.
o Its smooth functioning posed hurdles to US’ Protectionist &
unilateral measures

While US is currently Most noticeable disruptor, authoritarian countries

like China r also actively contesting underpinnings of M.L order.
Way forward for WTO
G20 Riyadh Summit recog "Riyadh initiative on future of WTO" for
reforming M.L trading system--
• Launch a new ‘SDG round of trade negotiations’--

o Has potential to get full consensus of all WTO members

o It will provide much-needed endorsement for free trade
o It will be successful in co-opting Devg & LDCs who r disillusioned with
abandonment of DDA
o With anti-globalisation forces on rise, it will demonstrate link b/w trade &
Dev that will help WTO members in achieving SDGs
o Will help WTO achieve Marrakesh objectives— Raising Stds of living,
ensuring full employment, Economic dev of all.
o It could also help resuscitate a moribund WTO.

• Appellate body reform-- As it is the lynchpin of DSM, which is the

‘jewel’ in WTO’s crown.
• Recalibrating Special & Differential treatments-- Devg & Devd status
shd be not based on ‘self-election' but on objective criteria. ex- link it
with MPI
• Restoring WTO dispute settlement mechanism + Stitch fair rules in larger interest
of all nations & thwart unfair trade practices of a few.
• Need for Collaboration in Post COVID world—Ensuring Supply Chains are
robust

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• In 2019 , India proposed a concept paper asking for overhauling

WTO with "Development centricism" + India cautioned that WTO
reforms should be premised on Principles of inclusivity, equity and
not to widen the existing asymmetries.

Conclusion
India should actively lead the voice of 3rd world in WTO to est its
leadership + work with mid-size trading economies with a strong
interest in preserving openness

FUTURE PROSPECTS FOR WTO IN WAKE OF

CHANGE IN US ADM
• Against Trump's "America first", Biden’s Affirmed commitment to M.L, free & fair
trade by rejoining Paris Accord.-- Hence Chances of revival of M.L & WTO, as it is
imp for US Hegemony
• But there r compelling Geo-political imperitives like US-China rivalry (Thucydides
Trap) + Discontent within American polity towards globalisation + huge
uncertainities created by Covid-19-- so no gurantee.
• MARK LINSCOTT--Although there may not be radical departure altogether from
Trump adm, but Biden Adm will take more constructive stance on M.L issues in
WTO & more likely to pursue remedies in WTO.

Doha Development Agenda

• Doha round was launched at MC4
• Known as DDA as it accorded priority to Dev over Trade + it sought to address
Devg's concerns in 3 areas-- Domestic support, Market access, export subsidies
• DDA decided to be adopted in framework of "Single Undertaking"-- Nothing is
accepted till everything is accepted.

Mandate for the negotiations--

• Agriculture--More market access, eliminate export subsidies, ↓ distorting subsidies
support.
• Dealing with Dev concerns of Devg-- Food security & rural dev.

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• NAMA-- ↓ or eliminate tariffs & non-tariff barriers, particularily on products of

export interest to Devg countries.
• Services-- Improve market access & strengthen the rules.
• Trade facilitation
• Improve DSM .

2015 Ministerial Conference Nairobi, Kenya (MC10) focused on a selected

number of issues that are part of DDA-- Agreement reached on following DDA issues:

• Stopping use of subsidies unfairly supporting Agri exports

• Ensuring that food aid for Devg countries is given in a way which does not distort
local markets
• Simplify conditions for exporters in Devg + Increase opp for their businesses from the
poorest countries to provide services in the WTO's 164 member countries

Why DDA failed so far

• Agri has always been bugbear in WTO negotiations
• Devd never interested, they actually wants to collapse of Doha talks
• Global south is unable to put a joint front against global north & get
swayed by individual dealings with US & EU—Need for global
south to come together, rather than dealing through fragmented
regional trade blocks.

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