WTO – Analysis in view of present economic crisis

WTO – Analysis in view of present economic crisis

The World Trade Organisation (WTO) is the primary body for establishing regulations for global trade. Over the course of its twenty years, it has assisted in lowering trade barriers for both commodities and services and developed a dispute settlement mechanism that has lessened the risk of trade wars.


The institution is, nevertheless, under a lot of pressure. The global economy is currently under pressure from protectionism, trade conflicts (such as those between the United States and China), the Russia-Ukraine wars and subsequent sanctions, Brexit etc. The functioning of the WTO has been hampered by disagreements over intellectual property rights and agricultural subsidies, as well as by other bilateral and regional free trade agreements..

Continuing Relevance of WTO due to its important mandate:

    • Trade agreements: It oversees the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement and other current multilateral trade agreements.
    • Dispute resolution: It uses its Dispute Settlement Mechanism to resolve conflicts among its members and avoid trade wars.
    • New negotiations: It acts as a stage and coordinator for talks on fresh international trade accords.
    • Establishes rule-based multilateral trading system: The World Trade Organisation (WTO) makes certain that international trade is governed by standards that are appropriate for and widely accepted.
    • Facilitates growth: The removal of trade barriers opens up new markets for the world’s resources, hence promoting global growth.
    • Arbitration function: The WTO serves as an arbitrator between warring nations and seeks to establish uniformity in practices and rules.
    • Promotes standardisation: The WTO and its members establish rules for the exchange of goods, services, and IP protection that close the quality gap between what is produced and what is desired.

Successes of WTO:

    • A significant increase in cross-border economic activity has been made possible by binding laws for international trade in products and services. While the actual amount of global trade has increased by 2.7 times since 1995, its monetary worth has nearly quadrupled. This is much greater than the global GDP’s two-fold increase during that time.
    • Tariffs on average have decreased by almost 50%, from 10.5% to 6.4%. The dozens of economies that joined the WTO after it was founded were required to make extensive changes and commitments to open their markets, which, according to studies, have been linked to a long-lasting increase in national GDP.
    • Global value chains have been made possible by the development of predictable market conditions encouraged by the WTO and better communications. Almost 70% of all merchandise commerce today occurs within these value chains.
    • In recent years, WTO members have agreed to simplify border processes through a historic trade facilitation pact that is expected to increase trade by more than $1 trillion annually.
    • The trade in goods related to information technology has also been liberalised.
    • For developing countries, COVID vaccination intellectual property rights were waived.
    • An agreement to reduce fishing subsidies, which have supported overfishing and resulted in declining fish stocks has been reached. The agreement forbids WTO members from providing subsidies to any operator engaged in overfishing or fishing in waters that are illegal, unreported, or unregulated.

Issues faced by the WTO which reduce its relevance:

    • Increasing economic uncertainty: In recent years, nations have imposed trade restrictions that affect a sizable portion of global trade. Businesses are delaying investments due to the increasing market uncertainty, which is reducing growth and our economies’ potential going forward.
    • Ineffective appellate body: Because of U.S. policy, the Appellate Body (AB) is crippled, giving nations an easy way to ignore the WTO panel’s rulings by appealing into the void.
      • Dispute settlement cases continue to be filed for the time being and are being litigated.
    • Structural issues: Technical functioning is currently completely insufficient to address the primary obstacles preventing the WTO from remaining strategically relevant in the 21st century. The organisation hasn’t delivered in crucial areas, responded, or changed.
      • Its structures and operations are in parts fragile, creaky, and deteriorating.
    • Subsidy issue: Agricultural and industrial subsidies have clogged the system and sparked protectionist responses in a number of WTO members.
    • Issue of public stockholding for food security purposes: Despite a clear directive to do so at the 2015 Nairobi ministerial meeting, there has been no resolution to the public stockholding for food security purposes issue. For nations like India that rely on mechanisms supported by the Minimum Support Price (MSP) to purchase foodgrains, this is of the utmost importance.
    • Fragmentation of global governance due to plurilateral trade agreements: The rise of large plurilateral trade accords like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP) agreement, which push the multilateral order to the periphery, is a result of the impasse at the WTO.
    • Institutional imbalance: The WTO missed the crucial balance between its role as an entity created to encourage, bind, and support economic transformation in order to counteract harmful protectionism and its role as an agency for litigation-based dispute settlement.
    • Tariff issue: The unilateral tariffs that the United States and China have threatened to impose on one another in the impending trade war do not follow the WTO’s established processes, eroding its authority.

Suggestions to increase effectiveness of the organization:

    • Recognizing that worries about food security will not go away, begin conversations to resolve the interrelated issues of agricultural subsidies and market access.
    • It is important to encourage multilateral negotiations because members with similar political ideologies have a chance to form coalitions.
    • It is necessary to remove political influence from the selection procedure for the dispute resolution body.
    • Instead of being resolved by the WTO, the issue of the misuse of the national-security exemption to support trade restrictions should be addressed at the political level.
    • For the purpose of reducing willful non-compliance, the WTO should be given sanctioning authority.
    • A consensus-based dispute resolution process is essential for a reliable trading system.
    • Engage in rigorous negotiations to balance the situation.
    • In a number of areas, GATT/WTO rules need to be updated. To stay up with advancements in technology and the industry, new rules are necessary.
    • Liberal multilateralism and non-discriminatory pillars will need to be the cornerstone of a reformed WTO.


The WTO’s future function is crucial to maintaining the post-World War II global liberalised economic order. India and other emerging economies with expanding economies like Brazil, South Africa, and others can lay a solid foundation for a successful WTO while defending the interests of developing nations.

plutus ias current affairs eng med 19th August 2022

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