Why is the WTO on the verge of collapse?
NEW DELHI: After today, the World Tade Organization will no longer be able to fulfill its role as arbitrator of world trade disputes. the WTO ’spowerful appellate body — which upholds, modifies or reverses ruling in trade dispute s— is set to lose two judges, who finish their terms on December 10, leaving the panel with just one member. The Trump administration has blocked new appointments to the appellate body, claiming it has overstepped its mandate. The US has also threatened to block the WTO ’s budget, which could cause the international organisation with 164 members to entirely shut down on January 1, 2020.
WTO GOVERNS $23 BILLION IN TRADE
WTO was founded in 1995 as the successor to the General Agreement on Tariffs and Trade ( GATT ), which was established in 1947. While GATT mainly dealt with trade in goods, WTO also covers trade in services and intellectual property, and introduced procedures for dispute settlement. WTO rules govern nearly $23 billion in global trade. It’s based out of Geneva.
DISPUTE SETTLEMENT MECHANISM CENTRAL TO WTO
WTO ’s dispute settlement procedures, often called the “crown jewel” of the body, allow for member states to seek action against other members for violating WTO rules. Dispute settlement begins with consultations to give the involved parties the opportunity to resolve the dispute themselves. If consultations fail, the complainant can seek the establishment of a panel, which will receive submissions from both parties and submit a report of its findings.
Here’s where the appellate body (AB) comes into play. If a panel report is appealed by any involved party, AB hears appeals and then makes the final and binding decision in dispute s. The body has a sanctioned strength of seven, but judge retirements left vacancies that were not filled, leading to the current situation.
Cases heard over 25 years
BUT US, CITING UNFAIR TREATMENT, HAS SCUTTLED WTO
Currently, the appellate body only has three judges, which is the quorum required to decide on dispute s. Since 2018, US has refused to approve appointments to fill vacancies on the appellate body. All appointments require unanimous agreement among WTO members.
The terms of two judges, American Thomas Graham and Indian Ujal Singh Bhatia, will end on December 10, leaving Hong Zhao of China as the only remaining member.
The US move has effectively defanged the WTO ’s dispute settlement procedure — if any party in a dispute appeals the initial decision, without enough judges in AB, the dispute will remain indefinitely unresolved. Not only has the US blocked appointments, it has also threatened to block the WTO ’s budget, which could force the body to shut operations entirely on January 1, 2020.
A CRIPPLED WTO COULD HURT INDIAN INTERESTS
India has several dispute s that will be left in limbo if the AB collapses. Ongoing dispute s include US and Japan complaining of excessive import duties and India pulling up the US for its steel and aluminium tariffs, and fee hikes for non-immigrant visas, including the H-1B. Status of india ongoing WTO (1)