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Title : WORLD TRADE ORGANIZATION: Time to act hard

Date : Nov 20, 2021

Description :

Based on an News Article published in the ‘The Hindu’ on 19th November 2021 on Page Number 1

Useful for UPSC CSE Prelims and Mains (GS Paper II)

About WTO:


  • The World Trade Organization (WTO) is an international organization tasked with overseeing and liberalizing global trade.
  • It is the world's sole organization that deals with international trade rules.
  • On January 1, 1995, it started operational.
  • It incorporates products, services, intellectual property, and various investment regulations, unlike its predecessor, GATT (which solely focused on goods).
  • Currently, the WTO has around 160 members.
  • Their entire proportion in international trade is more than 90%.
  • The WTO's decision-making body is the Ministerial Conference.
  • The decisions made at these conferences are binding since they are obtained by consensus (all members must agree).
  • The WTO Director-General is the organization's administrative leader, and because decisions are made by consensus, he or she has traditionally had limited control over the global trading regime.
  • Ngozi Okonjo-Iweala of Nigeria recently became the first woman and first African to hold this position.


What are the goals of the World Trade Organization (WTO):

  • The WTO's key goals are as follows:
  • Establishing and enforcing international trade regulations
  • Provide a venue for trade talks and allow for further trade liberalization.
  • Resolve commercial disputes
  • Transparency in decision-making processes should be improved.
  • Collaboration with other important international economic institutions participating in global economic management is a must.
  • Assist developing countries in reaping the benefits of the global trading system.


How did the World Trade Organization (WTO) come to be:


  • At the 1944 Bretton Woods Conference, which launched the post-World War II financial system and established the IMF and the World Bank, the idea of a global trade regime was devised.
  • The Bretton Woods Conference participants called for the creation of the International Trade Organization (ITO), which would act as an international trade regulator.
  • With the signing of the Havana Charter in 1948, this dialogue came to a close. Because to the United States' inability to ratify it, countries' fears about sovereignty breaches, and Cold War politics, this charter was never implemented.
  • As a result, the ITO was never formed.







How did the World Trade Organization (WTO) come to be:


  • This pushed those interested in the creation of the ITO to focus on more modest goals, such as enforcing the 1947 General Agreement on Tariffs and Trade (GATT), which was meant to be a stopgap measure until the new trade institution was founded.


  • The GATT lasted more than half a century, with contracting countries strengthening and deepening their tariff commitments.


  • The following are some of GATT's major flaws:


  • The GATT isn't a legitimate international organization.


  • GATT is a treaty to which countries are parties, and their commitment to the treaty is only transitory.





How did the World Trade Organization (WTO) come to be:


  • Despite its structural flaws, the GATT managed to operate as a de facto international organization, undertaking eight rounds of multilateral trade negotiations.


  • The eighth round of negotiations, known as the Uruguay Round (1987-1994), ended with the signing of the Marrakesh Agreement, which resulted in the WTO becoming a truly international organization with enforceable regulations and a dispute resolution process.


  • The WTO was established at the same time as the conclusion of the Cold War. It has the same legal and organizational status as other international organizations such as the International Monetary Fund and the World Bank.


  • The original GATT, as well as all revisions made prior to the Uruguay Round, was renamed GATT 1947.





How did the World Trade Organization (WTO) come to be:


  • GATT 1947 is not the same as GATT 1994, which is made up of clarifications and changes made during the Uruguay Round.


  • GATT 1994 was incorporated into the Marrakesh Agreement.


  • The General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the Understanding on Rules and Procedures Governing the Settlement of Disputes, and the Trade Policy Review Mechanism are among the other key components of the Marrakesh Agreement


  • The WTO has considerably enhanced free market access by covering more products and having more members than its predecessor.







WTO-Related Issues:


  • State Capitalism in China: The size and growth of China's economy, along with the structure of its economic system, has generated problems in the global trading system.


  • China's state-owned firms pose a significant threat to the global free-market trading system.


  • However, a significant part of the difficulty is that the WTO's rulebook is insufficient to solve China's challenges in terms of intellectual property, state-owned businesses, and industrial subsidies.


  • As a result, the United States and China are locked in a trade war.


  • Institutional Challenges: The Appellate Body's functions have been virtually halted since December 2019, when the United States blocked appointments, leaving the body without the quorum of adjudicators required to hear appeals.



WTO-Related Issues:


  • The WTO's dispute-resolution crisis is inextricably related to the organization's negotiation function failing.


  • Lack of Transparency: In WTO discussions, there is a dilemma because there is no agreed-upon definition of what comprises a developed or developing country.


  • Members can now self-identify as underdeveloped countries in order to receive'special and differential treatment,' a procedure that has sparked controversy.


  • E-commerce and Digital Trade: The global trade scene has altered dramatically in the last 25 years, but WTO laws have not kept up.








WTO-Related Issues:


  • In 1998, WTO members formed a WTO e-commerce moratorium to investigate all trade-related issues linked to global electronic commerce, understanding that e-commerce would play a growing role in the global economy.


  • However, poor countries have recently questioned the embargo because of its consequences for income collection.


  • Furthermore, as the Covid-19 epidemic hastens the migration to e-commerce, regulations governing online trading will become more vital than ever. However, unlike trade in products and services, cross-border e-commerce is governed by few international standards.


  • Agriculture and Development: The WTO Agriculture Agreement, which went into effect in 1995, was a watershed moment.




WTO-Related Issues:


  • The Agriculture Agreement focuses on subsidy reform and excessive trade barriers that disrupt agricultural trade.


  • However, due to food security and development concerns for emerging countries like India, an agreement on agriculture is having difficulties.


  • New Rules for the Future: The establishment of a new set of regulations for dealing with digital trade and e-commerce will be required as part of modernizing the WTO.


  • Members of the WTO will also have to deal more effectively with China's trade policies and practices, such as how to handle state-owned businesses and industrial subsidies.







WTO-Related Issues:


  • Increased attempts to integrate trade and environmental sustainability should assist both combat climate change and rejuvenate the WTO, given the critical challenges surrounding climate change.


  • In order to fulfill the UN Sustainable Development Targets (SDGs) and the Paris Agreement climate goals, trade and the WTO play critical responsibilities.


  • In addition, the WTO can help modify fossil fuel subsidies.


  • In 2017, a group of 12 WTO countries led by New Zealand called on the WTO to "establish ambitious and effective constraints on inefficient fossil fuel subsidies that encourage wasteful use" during the Buenos Aires Ministerial Conference.








  • Members of the WTO will have to find a balance in the future between moving forward with negotiations on 21st-century topics while keeping an eye on unresolved "old trade issues" like agriculture and development.



Tags : GATT, WTO, Tariff, India

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