Why is it in the News?

Reinstating a fully functional WTO dispute settlement body to resolve trade disputes between countries could take longer than expected as there continue to be wide differences between developed and developing countries over the issue, a GTRI report said recently.

Context:

• According to the GTRI report, an economic think tank, restoring a fully functional WTO dispute settlement body may take longer due to significant differences between developed and developing countries on the issue.
• This comes as the 164-member World Trade Organization (WTO) will gather next month in Abu Dhabi for the 13th ministerial conference (MC) to resolve different issues such as reforms in dispute settlement mechanisms, agriculture-related matters, etc.

Highlights of the GTRI Report:

• Escalating Protectionism: The absence of a functional dispute settlement body has fueled a surge in protectionist measures.
  • Since 2017, the US has obstructed the appointment of new judges to the WTO's seven-member appellate court, citing perceived harm to its interests.
• Delicate Balancing Act: Addressing India's appeals for an effective appellate body, special and differential treatment (S&DT) provisions, and fairness must be delicately balanced with the concerns of other members.
  • This includes considerations such as transparency and legal certainty, demanding significant compromise and negotiation.
• Complex Consensus Building: Reforming the dispute settlement system proves challenging as developed and developing nations hold divergent priorities and concerns.
  • Achieving a consensus requires navigating through intricate negotiations.
• Disproportionate Impact on the US: The proper functioning of the WTO Appellate Body disproportionately affects the US, given that over a quarter of all WTO disputes involve challenges to US laws or measures.

What is the Global Trade Research Initiative (GTRI)?

• Global Trade Research Initiative (GTRI) is a research Group focused on Climate Change, technology and trade
• GTRI aims to create high-quality and jargon-free outputs for governments and industry from the perspective of development and poverty reduction.
• Mr Ajay Srivastava is the Founder of GTRI.

What is the World Trade Organization?

• The World Trade Organization (WTO) is an international organization that deals with the rules of trade between countries.
• It was founded in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT), which, since 1948, had governed trade rules until the establishment of the WTO.
• The WTO describes its principal function as being to provide a forum for its members to negotiate on trade issues.
• It operates a body of rules in the form of WTO agreements.
• It provides a dispute settlement mechanism (DSM) to resolve disagreements over the rules between members.
• The WTO has many roles:
  • It operates a global system of trade rules, acts as a forum for negotiating trade agreements, settles trade disputes between its members and it supports the needs of developing countries.
• All major decisions are made by the WTO's member governments:
  • either by ministers (who usually meet at least every two years) or by their ambassadors or delegates (who meet regularly in Geneva).
• Decision-making:
  • All major decisions within the WTO are made by its member governments.
  • The top decision-making body is the Ministerial Conference, which typically convenes every two years.
  • Day-to-day decisions are overseen by the General Council, which meets regularly in Geneva.

• Membership
  • The WTO has over 160 members, representing 98% of world trade.
  • Joining the WTO requires aligning economic and trade policies with its rules and negotiating entry terms with the existing membership.
• Budget:
  • The WTO derives most of the income for its annual budget from contributions by its members.
  • These contributions are based on a formula that takes into account each member's share of international trade.
• Director-General:
  • Ngozi Okonjo-Iweala is the seventh Director-General of the WTO.
  • She took office on 1 March 2021, becoming the first woman and the first African to serve as Director-General.
  • Her term of office will expire on 31 August 2025.
• The primary purpose of the WTO is to open trade for the benefit of all.

About the WTO Dispute Settlement Body (DSB):

• The WTO Dispute Settlement Body (DSB) deals with disputes between WTO members.
• It was created in Article 2 of the Dispute Settlement Understanding (DSU) administers World Trade Organization (WTO) dispute settlement proceedings.
• The DSB consists of all WTO members, usually represented by Ambassadors or equivalent.
• It makes decisions on trade disputes between governments that are adjudicated by the Organization.
• The DSB has the sole authority to establish “Panels” of experts to consider the case and to accept or reject the Panels’ findings or the results of an appeal.
• The DSB uses a special decision procedure known as "reverse consensus" or "consensus against" that makes it almost certain that the Panel recommendations in a dispute will be accepted.
• The process requires that the recommendations of the Panel should be adopted "unless" there is a consensus of the members against adoption.
• The DSB monitors the implementation of the rulings and recommendations and has the power to authorize retaliation when a country does not comply with a ruling.

Why is the WTO Dispute Settlement Body (DSB) Inoperative?

• The WTO's dispute settlement system faces a critical challenge as its appeals mechanism is currently non-operational.
• The root cause lies in the United States objection to the appointment of new judges to the Appellate Body, citing concerns about judicial overreach.
• Consequently, a significant number of panel reports are left in limbo, with appeals going unanswered and disputes lingering without resolution.
• This impasse creates a formidable obstacle for WTO members seeking to enforce their obligations through complaints against measures they perceive as violations.

Conclusion

The WTO's dispute resolution mechanism grapples with a formidable crisis, rendering it largely nonfunctional due to the U.S.'s opposition to new Appellate Body judges. This impasse leaves disputes unresolved, severely limiting members' ability to enforce obligations. As the organization grapples with this crisis, finding a resolution becomes paramount to restore the efficacy of international trade agreements and uphold the WTO's core principles.