HOW TO RESTORE WTO’S AUTHORITY?

THE CONTEXT: The WTO’s Dispute Settlement Mechanism is currently facing a deadlock due to the United States’ resistance to appoint new members to its Appellate Body. This deadlock has led to the inability to enforce rulings, thus diminishing the WTO’s capacity to resolve trade disputes effectively. The 13th ministerial meeting in Abu Dhabi aims to address this crisis and explore potential resolutions to revitalize WTO’s DSM by forging a consensus among member nations.

ISSUES:

• Crisis in Dispute Settlement Mechanism (DSM): The impasse due to the United States blocking appointments to the AB since the end of 2019 crippled the appellate body. Countries bypass compliance with WTO panel rulings by appealing to a dysfunctional appellate body. There is a threat to a rules-based global trading system due to the inability to enforce dispute settlements.
• US Obstructionism: The US’s resistance to the appellate body is strategic blocking, stemming from its loss in several critical disputes. The USA desires to limit the judicial nature of international trade dispute resolutions (De-Judicialization).
• Voluntary vs. Mandatory Jurisdictions: The Multi-Party Interim Appeal Arbitration Arrangement (MPIA) is voluntary, which carries forward the critical implications of non-binding awards on non-parties. There is a proposal to allow countries to opt out of compulsory jurisdiction and its potential ramifications.
• Legal Certainty and Predictability: A diluted Appellate Body has serious consequences of a weakened Appellate body and the potential loss of jurisprudence and clarity in WTO law. There is a risk to the stability and predictability of global trade due to a weakened dispute resolution mechanism.
• Differential Impacts on Developing Countries: A weakened or optional DSM mechanism might disadvantage developing countries like India. The absence of a binding appellate body could affect the reliance on established WTO jurisprudence for future rulings and erosion of legal precedents.
• Strategic Considerations for India and Other Developing Countries: India and other developing nations have the strategic push to re-establish a fully functional appellate body. India and like-minded nations are negotiating various options and looking for strategic impacts in pursuing a fair and effective DSM.
• Legitimacy and Equity in Global Trade Governance: Drawing parallels with the non-compulsory nature of the ICJ as a potential model for a voluntary appellate mechanism. Evaluating the proposal for a selective AB and its potential to maintain integrity within the WTO system.

THE WAY FORWARD:

• Revitalization of the Appellate Body (AB): Discuss and deliberate upon the strategies for fully restoring the AB as it operated before 2019. Consider reform options acceptable to major WTO players, especially the US.
• Adoption of the Multi-Party Interim Appeal Arbitration Arrangement (MPIA): Evaluation of steps to enhance the MPIA’s framework effectiveness during the AB impasse. Institutionalization for the MPIA to serve as a permanent alternative to the AB.
• Considering a Diluted AB: Detailed Analysis of a compromised version of the AB with limitations to address certain member concerns. There is a need to investigate the Implications of a diluted AB’s decisions on future WTO jurisprudence.
• Strengthening the Panel Stage of Dispute Resolution: Measures to enhance the quality of panel findings to reduce reliance on the appellate stage. Looking into the Viability of making panel decisions more conclusive in the absence of the AB.
• Ensuring Predictability and Security in Trade: Maintaining a Rule-Based System so that the Role of WTO to provide a predictable and safe global trading environment remains intact. Use the established AB rulings to maintain continuity and predictability.
• Building Consensus Among Members: Strategic alliances among members, especially developing countries, advocating for a functional DSM. Approaches to persuade reluctant members to support the restoration of a fully functional DSM need to be advocated by developing nations.
• Learning from Other International Adjudicative Bodies: Drawing Insights from the experience of the ICJ to navigate voluntary participation in the AB. Ensuring the continued legitimacy and relevance of WTO in the international legal order.
• Engaging in Strategic Flexibility: Willingness to work with interim measures while striving for the ideal long-term solution. A deep Assessment of the feasibility and effectiveness of interim arrangements for India and other developing countries is needed.

THE CONCLUSION:

WTO faces a crucial juncture where decisive action is imperative to preserve the integrity of the DSM. Developing countries must collectively pursue viable interim solutions while advocating for the restoration of the Appellate Body to uphold the rule of law in international trade. The upcoming negotiations present an opportunity to reaffirm commitment to a functional, equitable, and binding dispute settlement mechanism within the WTO framework.

UPSC PAST YEAR QUESTION:

Q. What are the key areas of reform if the WTO has to survive in the present context of the ‘Trade War’, especially keeping in mind the interest of India? (2018)

MAINS PRACTICE QUESTION:

Q. Examine the challenges posed by the current crisis in the WTO’s Dispute Settlement Mechanism (DSM) and analyze the potential solutions and their implications for the multilateral trading system.

SOURCE:

https://indianexpress.com/article/opinion/columns/ukraine-war-gaza-conflict-middle-east-strikes-risk-management-political-risk-9144168/