The Economic Times, September 07, 2023
By Pradeep S Mehta
It must be recognised that a core pillar supporting the multilateral trading system from 1995 into the late 2010s has been a well-functioning WTO dispute-settlement mechanism. Resolving trade disputes has been a central tenet of WTO’s role as a guarantor of an enforceable regime of predictable and rules-based trade. Most of the disputes were won by poor countries.
It will soon be four years since the appellate body (AB), the second tier of the two-stage dispute-settlement mechanism of WTO, became defunct, thus affecting developing countries adversely. One hopes that PM Narendra Modi can impress upon US President Joe Biden at the G20 summit to restore it and help the global south and multilateralism.
Under India’s G20 presidency, it was hoped that G20 economies would demonstrate their collective commitment to AB’s restoration. However, despite trade minister Piyush Goyal’s persuasive statement before the recently held G20 Trade and Investment Ministers’ Meeting (TIMM) in Jaipur, the outcome document does little to inspire confidence that they are prioritising this issue. G20 has emphasised the role of WTO-driven multilateral trade liberalisation since its founding. This was aligned with the primary mandate of the G20: improving global economic conditions through broad-based economic development.
It must be recognised that a core pillar supporting the multilateral trading system from 1995 into the late 2010s has been a well-functioning WTO dispute-settlement mechanism. Resolving trade disputes has been a central tenet of WTO’s role as a guarantor of an enforceable regime of predictable and rules-based trade. Most of the disputes were won by poor countries.
However, the global trade landscape has transformed in the past few years. Growing concerns raised by WTO members on AB’s functioning led to an impasse in 2019 that has rendered the stage inoperative. Apart from limited successes, there has been only halting progress on multilateral trade liberalisation.
Finally, a shift in the positions and attitudes of major G20 nations towards trade and foreign policy in recent years, combined with the intermixing of economic and security concerns, has led to geoeconomic fragmentation.
Against this background, it is undeniable that discussions on the diverse aspects of WTO reform, including those related to AB and other facets of the dispute-settlement system, have become even more challenging.
It is worth noting that the G20 Osaka Leaders’ Declaration, which happened six months before the height of the AB crisis in 2019, contained a paragraph in which G20 countries agreed that action was necessary, regarding ‘the functioning of the dispute settlement system consistent with the rules as negotiated by WTO members’.
It has been evident for some time that the US, the WTO member with the most significant concerns about the manner of AB’s functioning, is unlikely to settle for anything less than an overhaul of the WTO dispute-settlement architecture. US trade representative Katherine Tai reiterated this at TIMM. The US has now put forward many ideas within the informal dispute-settlement reform talks underway at WTO. However, it remains unclear what such a fundamental rethink would mean for AB’s future and the appeals mechanism itself.
Given all these developments, it is not surprising, but still disappointing, that the Jaipur TIMM outcome document does not mention the AB crisis. There is no recognition of the need for urgent, outcome-oriented action towards restoring AB. There is only a standard reference where G20 countries have reproduced the anodyne language agreed upon at WTO’s 12th Ministerial Conference (MC12) last year – conducting discussions to have a well-functioning dispute-settlement system accessible to WTO members by 2024.
It is also a reflection of the state of affairs on dispute-settlement reform talks, when there are severe differences over whether this MC12 mandate refers to an outcome by MC13, scheduled to be held in February 2024, or whether it gives members time to discuss this over next year. 2024 will throw up many other imponderables, most notably the US presidential election, which could further stall progress on this issue.
Let there be no mistake. A fully functioning WTO dispute-settlement system, as originally conceived, requires a standing AB.
Under the Indonesian G20 presidency last year, there was no reference to WTO dispute-settlement reform or AB in the chair’s summary of the trade ministers’ meeting. However, the G20 Bali Leaders’ Declaration contained a specific commitment to advance discussions on reform of the dispute-settlement mechanism on the path leading to MC13.
G20 must go a step further in New Delhi this weekend. It must declare full support to the WTO dispute-settlement system, commit to its reform, and place particular emphasis on restoring the AB with a timeline. This must be followed by concerted efforts in the run-up to MC13. G20 must work with the wider WTO membership and find a way out of the AB stalemate, which has lasted far too long.
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