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World Trade Organization: U.S. crippled the functioning of the WTO

  • IASbaba
  • January 6, 2020
  • 0
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TOPIC: General Studies 2:

  • Important International institutions, agencies and fora- their structure, mandate.

World Trade Organization: U.S. crippled the functioning of the WTO

Context:

  • Recently  the U.S. chose to spike the Appellate Body of WTO by starving funds for its functioning. 
  • US  stalled the selection process for filling six vacancies at the Appellate Body. Consequently, the Appellate Body is left with only one member, who will not be able to deliver any rulings on pending trade disputes (a minimum of three members is required to adjudicate any dispute)

Why US Chose to spike?

  • Appellate Body has posed hurdles to the U.S. for adopting unilateral measures. Several U.S. 
  • provisions for imposing countervailing and anti-dumping measures were found to be inconsistent with core provisions of the WTO agreements.
  • Finally, the U.S. chose to spike the Appellate Body by resorting to starving funds for its functioning as well as blocking the selection process for filling six vacancies. 
  • Consequently, the Appellate Body is left with only one member, who will not be able to deliver any rulings on the pending trade disputes.
  •  A minimum of three members are required to adjudicate any dispute.

World Trade Organization’s Appellate Body :

  • For proper enforcement of trade rules, a binding, two-stage dispute settlement system was established at the World Trade Organization in the 1990s. 
  • The Appellate Body is the scaffolding of the dispute settlement system, with seven standing members.

Working:

  • In the first stage for adjudicating trade disputes, a panel would decide cases brought before it by the members. Rulings issued by the panels can be appealed at the Appellate Body. 
  • As part of the second-stage of adjudication, the Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel. 
  • The Appellate Body’s decisions are final and adopted within 30 days by the dispute settlement body. 
  • Sanctions can be imposed on a member in case of its failure to comply with the Appellate Body’s rulings.

Cases dealt:

  • Cases involving trade remedies such as countervailing and anti-dumping measures, and the use of a controversial practice called the zeroing methodology that inflated the anti-dumping duties.

Significance:

  • The establishment of the Appellate Body has given teeth and credibility to the rules-based multilateral trading system. 
  • Moreover, it provided security and predictability in the multilateral trading system.

India’s Stand:

  •  “At the core of a functioning multilateral trading system is an effective dispute resolution mechanism.” Although not perfect, the dispute settlement system has led to meaningful reductions in unfair trade practices and has helped to strengthen the rules-based international trading system.” The U.S. has been one of the bigger users of the dispute settlement system and also a beneficiary “of this public good,” India said, cautioning that “unless the Membership acts in concert … to lift the block on AB vacancies, we are going to lose this public good which has served all of us so well.”

Impact:

  • It is a tremendous loss for the majority of WTO members who are all developing and poor countries. 
  • they “lack the political and economic clout to enforce their rights and protect their interests in a system governed by power and not rules.

Conclusion:

  • The absence of the Appellate Body will create a jungle raj and paves the way for a steep descent into the General Agreement on Tariffs and Trade, 1947 rules.

Connecting the dots:

  • How do you think it impacts India?
  • Do you think US will change its stand?
  • Is the World Trade Organization dying?

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