Model Answer
0 min readIntroduction
The World Trade Organization (WTO), established in 1995, has been the cornerstone of the multilateral trading system. However, the organization is currently facing an existential crisis, largely due to the rise of protectionist policies and ‘Trade Wars’ initiated primarily by the United States. The paralysis of the Appellate Body, a key dispute resolution mechanism, and the lack of progress on longstanding issues like agricultural subsidies, pose significant threats to the WTO’s relevance. For India, a developing nation heavily reliant on a rules-based multilateral trading system, the survival and reform of the WTO are crucial for ensuring a level playing field and promoting its economic growth.
The Current Crisis and its Impact on India
The ‘Trade Wars’ initiated by the US, particularly under the Trump administration, involved imposing tariffs on goods from various countries, including China, the EU, and India. This has led to retaliatory measures, disrupting global supply chains and increasing uncertainty in international trade. The blockage of appointments to the WTO’s Appellate Body, initiated by the US, has effectively crippled the dispute resolution mechanism. This is particularly detrimental to India, which has frequently used the WTO’s dispute settlement process to challenge unfair trade practices by developed countries.
Key Areas of Reform for WTO Survival
1. Dispute Resolution Mechanism
Problem: The Appellate Body’s paralysis prevents effective enforcement of WTO rules. Without a functioning dispute resolution system, powerful nations can disregard rulings without consequence.
Reform: Establish a permanent and fully functional Appellate Body with a clear appointment process. Explore alternative dispute resolution mechanisms, but these should complement, not replace, the formal system. India should advocate for a system that is impartial and accessible to all members, especially developing countries.
2. Agriculture
Problem: Developed countries continue to provide substantial agricultural subsidies, distorting global markets and harming farmers in developing countries like India. The ‘Peace Clause’ (allowing developing countries to exceed subsidy limits without facing legal challenges) has been ineffective and subject to stringent conditions.
Reform: Negotiate a more equitable system of agricultural subsidies, with stricter limits on trade-distorting subsidies provided by developed countries. Strengthen the Peace Clause and make it more predictable and less conditional. India should push for greater transparency in agricultural policies.
3. Special and Differential Treatment (S&DT)
Problem: The principle of S&DT, which recognizes the special needs of developing countries, has not been effectively implemented. Developed countries often resist providing meaningful concessions to developing countries.
Reform: Operationalize S&DT provisions across all areas of WTO agreements. Provide technical assistance and capacity building to developing countries to help them implement WTO rules. India should advocate for a more robust and enforceable S&DT framework.
4. E-commerce
Problem: The rapid growth of e-commerce presents new challenges for the WTO. There is a lack of consensus on issues such as data localization, digital tariffs, and cross-border data flows.
Reform: Develop a comprehensive framework for e-commerce that addresses the concerns of developing countries. Ensure that developing countries have the flexibility to adopt policies that promote their digital development. India should advocate for a framework that protects its data sovereignty and promotes domestic digital industries.
5. Fisheries Subsidies
Problem: Overcapacity and overfishing are major concerns. Negotiations on fisheries subsidies have been protracted, with disagreements on the scope and nature of the subsidies to be prohibited.
Reform: Reach a meaningful agreement on fisheries subsidies that addresses harmful subsidies contributing to overfishing and illegal, unreported, and unregulated (IUU) fishing. India needs to ensure its legitimate interests, particularly those of its small-scale fishers, are protected.
India’s Interests and Role
India has a significant stake in the WTO’s survival. The organization provides a platform for India to advocate for its interests, challenge unfair trade practices, and promote its economic development. India should actively engage in the reform process, working with other developing countries to build consensus and push for a more equitable and inclusive trading system. India should also be prepared to offer compromises, but only on terms that are consistent with its national interests.
Conclusion
The WTO is at a critical juncture. Its survival depends on the willingness of member states to address the underlying causes of the current crisis and to embrace meaningful reforms. For India, a revitalized WTO is essential for promoting its economic growth, protecting its farmers, and ensuring a level playing field in international trade. A proactive and constructive role by India, in collaboration with other developing countries, is crucial for shaping a WTO that is fit for the 21st century and serves the interests of all its members.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.