HPAS/Allied Mains 2022 Answer Writing Challenge Day 28: Model Answer

Question: What are the key areas of reform if the WTO has to survive in the context of ‘Trade War’, especially keeping in mind the interest of India ?  (8 marks, 120 words)

Answer: 

INTRO

• Economists were wary of an all-out trade war. With USA imposing a lot of taxes on imports and China hitting back with similar measures, there is every possibility that world will witness a trade war in the coming time.
• The arbiter of international trade dispute – WTO – was born in 1995 out of a set of agreements struck by countries trying to reduce trade barriers. If a government’s complaint about other nation’s trade barriers is seen as grounded, the WTO recommends acceptable retaliations.
• But, in the contemporary world, not only the multilateral trade negotiations of WTO have stuck, but overall rule-making mechanism of the organization has made little progress while alternative trade pacts have challenged the prospects of multi-literalisms.

BODY

• There are clear signals that US and EU want a new system of trade negotiations by making current one dysfunctional, that is why they are regularly violating the WTO rules just for the sake of national interests. So, WTO is facing existential crisis during a time when developed economies have adopted protectionist attitude.
• On the other hand, India along with other member countries of WTO, urges to make some reforms in WTO rules in order to ensure that it remains an engine for global trade.
• Since, WTO acts as an essential pillar of global trade governance providing the framework of rules and practices that underpin majority of global trade, so it becomes necessary to structurally upgrade the system to provide rule-based system as well as stability and predictability in the world trade.

Some of suggestive reforms are: 

• The WTO Dispute Settlement process is highly structured and efficient, but it is biased and exclusionary. WTO needs to strengthen the dispute settlement mechanism as there are issues in appointment of judges in new appellate body. WTO also needs to enhance discussion mechanism by introducing wider consultation of developing countries like India that should be given a fair chance to participate in decision-making process.
• Though WTO has come out with Trade Facilitation Agreement in reducing trade costs, but it mainly addresses the trade of goods. India being a major service provider would benefit if reforms are carried out in trade facilitation of services.
• There is a need for structural reforms in 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 developed nations.
• The process of retaliations is ineffective and impractical for smaller nations.
• The global community urgently needs the WTO, albeit a reformed, re-energized and more democratic and inclusive. WTO which prizes the dictum fairness to all.
• The world needs multilateral trading pacts under the aegis of a reformed WTO that incentivizes inclusive and sustainable eco-friendly development.\