Articles >India must lead WTO reform...
India must lead WTO reform
The Week, April 08, 2018
By Pradeep S Mehta
WTO’s dispute settlement system and the modalities of
negotiations need to be revised
Over the last couple of weeks, the US has launched a number of trade
missives, which can further undermine the already beleaguered global
trading system. They came at a time when the system—not global trade
per se—is undergoing one of its most testing phases in recent
First, the US imposed unusually high tariffs on steel and aluminium,
on specious grounds of “national security”. Then, they threatened
India with the filing of a dispute, the first by the Trump
administration, at the World Trade Organization about our export
subsidies. This happened on the very day United States Trade
Representative appointed their ambassador to the WTO, Geneva, after
a long hiatus.
While the European Union and China raised their voice against the
US, about the imposition of higher tariffs on such a ground, India
has not reacted. India will be at the receiving end on the first one
Taken together, all this can potentially lead to a trade war. The
WTO dispute settlement system is unlikely to come to a rescue. This
is because, if the EU and China file a case against the US move on
steel and aluminium tariffs and win it, the US will surely
disrespect the judgement. On the other hand, if the US win this
case, other countries will copy the move to protect their “national
As far as India’s export subsidies regime is concerned, there is a
strong chance that the US move will not pass muster at the WTO.
However, it will be better for India to take a closer look at such
subsidies to see how they can be made more non-product-specific, so
as to enhance the overall productivity of our economy rather than
just supporting a specific product group.
While it remains to be seen how such disputes will play out at the
WTO, the fact is they have further undermined the effectiveness of
the trade organisation as the custodian of a rules-based
international trade regime. Now, this crisis has to be used as an
opportunity to reform the WTO system.
There is nothing new in this call for reforming the WTO. Since the
global financial crisis of 2008, a number of trade honchos—including
immediate ex-director general of WTO Pascal Lamy—have said that one
cannot run such a system in the 21st century with a 20th century
mind-set. This is primarily due to the emergence of several new
subjects, such as electronic commerce, on the trade proscenium.
Therefore, reforms are needed in at least two critical areas of the
WTO’s functioning. They are: a) dispute settlement system, and b)
modalities of negotiations. On the second, some progress has been
made, as the ‘single undertaking’ nature of negotiations is all but
discarded. It is now time to focus on the first. The WTO members
should demand a special session to discuss necessary reforms to make
its ‘jewel in the crown’ as effective as it used to be in the first
decade of its establishment.
Where does India stand in this game? As compared with what it used
to be at the time of WTO’s establishment, we have a much larger
stake in the system now. More than 40 per cent of our economy is
exposed to international trade. If we want to achieve a double-digit
growth over a sustained period and create jobs, our external trade
has to grow at more than 15 per cent a year. This is not possible in
an uncertain trading environment.
Therefore, India should call upon all WTO members, including the US,
to undertake a systemic reform in the above-stated crucial areas of
the WTO’s functioning. In this regard, Union Commerce Minister
Suresh Prabhu has made a good beginning in New Delhi last week when
he called a mini-ministerial of the WTO members following the
collapsed talks in Buenos Aires last December. Now, it is time for
India to show similar leadership in Geneva, and make things happen
for the benefit of the international trading system.
The writer is secretary general, CUTS International, a global
think-and-action-tank on economic policy issues.
This article can
also be viewed at: