WTO and Dispute Settlement Crisis

Two of the three members of the Appellate Authority of the World Trade Organization (WTO) have been relieved in the same month (December), it is known that now only one member is left in the authority. Additionally, another problem facing the WTO’s appellate authority is that last year, the United States prohibited new appointments using the veto, because the United States felt that the WTO acted in a spirit of favor. In such a situation, experts say that the Appellate Authority of the World Trade Organization is on the verge of collapse and if its status is not seriously considered by the global community at the earliest, its relevance may appear to be questioned.

The background

  • As per the WTO rules, the Dispute Settlement Mechanism or Appellate Authority requires at least three members to function and with the release of 2 members in the past, the Appellate Authority has been completely halted.
  • Some experts believe that this challenge before the appellate authority may threaten the existence of the WTO itself, as the system of settling disputes is considered to be the most important function of the organization.
  • In fact, last year, the US, using the veto, prohibited the appointment of new members to the authority and the reappointment of the members who have completed the 4-year term.
  • The US, accusing the WTO of misusing its powers and acting in a spirit of partiality, citing ‘unfair’ treatment of itself.
  • Supporters of this decision by the US believe that the WTO has given China an opportunity to strengthen its economy. Also, it is not doing anything for unfair trade practices being widely used by China.

WTO Dispute Settlement Mechanism

  • The dispute settlement system of the WTO seeks to settle any trade dispute initially through consultation between the member countries concerned.
  • If this remedy is not successful, then the matter goes to a Dispute Panel. The decision of the dispute panel is final, but an appeal against its decision can be made to the Appellate Body-AB.
  • Be aware that the dispute resolution mechanism of the WTO is one of the most active systems in the world.
  • The decisions of the Dispute Panel are reviewed by the Appellate Authority and are final and binding on the Member States after the report is submitted by the Appellate Authority.
  • According to the WTO system, the AB should consist of seven members who are appointed by consensus among the member countries of the WTO. Any appeal from the WTO’s dispute panel is heard by three of the seven members of the AB.
  • These seven members are appointed for a four-year term. Once the term of an AB member is over, a new member is required to maintain the member capacity of the AB.

Why is Appellate Authority important?

  • It is known that the Appellate Authority was established in the year 1995 and since then more than 500 international disputes have been brought to the notice of the World Trade Organization (WTO) and adjudicated in more than 350 cases.
  • The Dispute Settlement Mechanism of the organization is one of the most active mechanisms in the world and the Appellate Authority is the supreme authority in these matters.
  • The WTO’s dispute settlement process is considered important to ensure smooth flow of international trade flows.
world trade organization

Effect of inaction of authority

  • If the Appellate Authority of the World Trade Organization is declared inactive, then countries carrying their international disputes before the WTO must implement the decision taken by the panel, irrespective of any kind of error in it. Ho.
  • The authority’s inaction may weaken the WTO structure in the wake of efforts over the past few years to reduce protectionism in global trade.
  • Currently trade stress is a major concern. For example, trade tension between US-China and US-India is increasing.
  • If this authority is abolished, then there will be no platform to settle the countries involved in international trade disputes.

Impact on india

  • The inaction of the WTO Appellate Authority is not in the interest of India at all, because of which many of India’s disputes will remain in balance.
  • It may be noted that India has been a direct partner in a total of 54 disputes since 1995, while a third party has been involved in 158 disputes.
  • In February this year, the Appellate Authority expressed its inability to provide staff for an appeal in an ongoing dispute between India and Japan.
  • It is important to note that this dispute is related to some safeguards imposed by India on the import of iron and steel products.
  • In the last one year, four complaints have been lodged against India in the World Trade Organization alleging that India is taking measures to raise support for its sugar and sugarcane producers by going beyond the scope of WTO rules.
world trade

World Trade Organization and its Relevance

  • The WTO is an intergovernmental organization promoting global trade by removing trade-related barriers in the world, which was established in 1995 under the Marrakesh Treaty.
  • The world has undergone extensive changes since the WTO came into existence in 1995, many of which have been deeply structural in nature. New technologies have changed the way we think, communicate and do business.
  • In 1995, less than 0.8 percent of the world’s population was using the Internet, while in June 2019, this number is about 57 percent.
  • Communication technologies and containerization have reduced costs and increased the amount of import-export components from the country leading to increased internationalization of the production chain.
  • The iPhone, for example, consists of about 14 core components manufactured by 7-8 multinationals (with branches in more than 40 countries).
WTO 2020
  • Since 1995, the overall trade in commodities has grown to almost four, while the WTO member countries’ import duty has dropped by an average of 15 percent. More than half of world trade is now duty-free (WTO, 2015).
  • The growth rate in international trade has exceeded the growth rate in world GDP and this increase in trade has been associated with improvement in the standard of living of the people.
  • The WTO currently controls more than 98 percent of global trade flows between its member countries. In addition, the WTO oversees the implementation of the Free Trade Agreement, conducts research on global trade and economic policies, as well as acts of a dispute resolution mechanism for trade disputes between countries.
  • Rather than looking at the amount of trade that the WTO has created and the reduction in fees, another point of view should be noted that the WTO has lost $ 340 billion worth of trade losses each year. Has come.

Road ahead

  • When it is decided to appoint new members to the appellate authority, it requires the consensus of all WTO members. If there is no consensus in these, then there is a provision for voting. In such a situation, the possibility of non-implementation of this authority cannot be ruled out in view of the persistence of America.
  • In view of this situation, many states have tried to adopt ad hoc resolution for settlement of disputes.
  • Countries like Indonesia and Vietnam have agreed in advance not to appeal the panel’s decision in a dispute between them.
  • In addition, the European Union (EU), Norway and Canada have also agreed to an interim appeal system to resolve any dispute using Article 25 of the Dispute Settlement Understanding (DSU) through arbitration.
  • A group of 17 Least and Developing Countries including India have committed to work together to end the impasse in the Appellate Authority. Therefore, a resolution to this effect should be brought and voted and on the basis of majority, an attempt can be made to appoint a new member in the Appellate Authority. It is worth mentioning that some experts are also seeing this as the last option.

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