11 Jul 2023 WTO Dispute Settlement System
This article covers “Daily Current Affairs” and the topic details “WTO Dispute Settlement System”. The topic “WTO Dispute Settlement System” has relevance in the “International Relations” section of the UPSC CSE exam.
For Prelims:
What is WTO? What is the WTO Dispute Settlement Body?
For Mains:
GS2: International Organizations- their structure and mandate
Why in the news?
In June 2022, the member-states of the World Trade Organization (WTO) were able to reach a face-saving agreement at the Geneva ministerial conference, which included reviving the WTO’s dispute settlement system (DSS) by 2024.
World Trade Organization (WTO):
The World Trade Organization (WTO) is the singular global organisation dedicated to managing international trade regulations among nations.
- It establishes guidelines for the worldwide trading system and resolves disputes between its member countries.
- The foundation of the WTO lies in the negotiated and ratified agreements, endorsed by the majority of trading nations and approved by their respective parliaments. Its primary objective is to facilitate the smooth, predictable, and unhindered flow of trade.
- Additionally, the WTO encompasses various aspects of trade, including services such as telecommunications and banking, as well as intellectual property rights.
Evolution of WTO:
- In 1948, several countries formed the General Agreement for Tariffs and Trade (GATT) with the aim of reducing high customs tariffs and other trade restrictions worldwide.
- Subsequently, in 1994, member countries decided to establish a permanent institution to promote free and fair trade among nations, leading to the transformation of GATT into the World Trade Organization on January 1, 1995.
- While GATT mainly focused on tariffs and trade barriers, the WTO expanded its scope to encompass a broader range of trade-related issues. The negotiation process among GATT members aimed to eliminate trade barriers, resulting in seven rounds of extended negotiations. The final round, known as the Uruguay Round, commenced in September 1986 and concluded in December 1993.
- These negotiations covered not only the traditional subjects such as tariffs and non-tariff restrictions, but also extended to cover seven broad areas, viz.,
- market access
- agriculture
- textiles
- trade related intellectual property rights (TRIPS)
- trade related investment measures and services (TRIMS)
- trade in services
- institutional matters
HQ Location: Geneva, Switzerland
Membership: It includes 164 members amounting to 98 percent of world trade
Functions of WTO:
- Administering WTO trade agreements
- Forum for trade negotiations
- Handling trade disputes
- Monitoring national trade policies
- Technical assistance and training for developing countries
- Cooperation with other international organizations
Structure of WTO:
- The Ministerial Conference is the supreme decision-making body of the WTO and usually meets every two years.
- Directly beneath it is the General Council, composed of ambassadors and delegation heads stationed in Geneva, and occasionally officials dispatched from members’ capitals. The General Council holds multiple sessions annually at the WTO headquarters in Geneva.
- Moreover, the General Council assumes the roles of the Trade Policy Review Body and the Dispute Settlement Body.
- Operating at the subsequent tier, the Goods Council, Services Council, and Intellectual Property (TRIPS) Council function under the authority of the General Council.
- All WTO members have the right to participate in all councils and committees, except for the Appellate Body, Dispute Settlement panels, and plurilateral committees, which are limited to certain members.
WTO Dispute Settlement System:
The dispute settlement system (DSS) of the WTO comprises two key components: the Dispute Settlement Body (DSB) and the Appellate Body.
Dispute Settlement Body (DSB)
- To address conflicts among WTO members, the General Council convenes as the Dispute Settlement Body (DSB).
- Such disputes may arise regarding any agreement outlined in the Final Act of the Uruguay Round that falls under the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
- The DSB settles trade disputes by establishing panels, referring matters to arbitration, adopting reports, overseeing implementation, and authorizing suspension of concessions.
- The DSB refers the disputes to the Appellate Body.
Appellate Body
- The Appellate Body serves as a standing body consisting of seven individuals.
- Its purpose is to hear appeals arising from reports issued by panels in disputes initiated by WTO Members.
- The Appellate Body holds the authority to uphold, modify, or reverse the legal findings and conclusions of a panel.
- Appellate Body Reports are adopted by the Dispute Settlement Body (DSB) unless all members decide against doing so.
Reasons for its non-functionality:
- Lack of Members: The WTO’s Appellate Body is currently unable to hear appeals due to a lack of members. The last sitting Appellate Body member’s term expired on November 30, 2020.
- US’ Blockade: The United States has blocked the appointment of new judges to the WTO’s Appellate Body for nearly two years due to concerns about judicial activism at the WTO and sovereignty.
US’ stance:
- The US reproaches the appellate body for exceeding its mandate and engaging in judicial overreach.
- The US argues that the appellate body has been creating binding precedents, which goes against the WTO’s dispute settlement understanding (DSU) that states there is no rule of precedent in international law.
- The US argues that until the appellate body’s role is defined, it should not be resurrected.
Significance of the WTO’s Dispute Settlement System:
- The DSS is considered to be the foundation of the multilateral trading system and the organization’s “unique contribution to the stability of the global economy.”
- It provides a forum for member countries to resolve trade disputes pertaining to a “covered agreement” and encourages disputes to be resolved through negotiations .
- The priority is to settle disputes, through consultations if possible.
- The DSS is vital to the functionality of the WTO as it provides an amenable platform for member states to settle their disputes. In its absence, disputes will persist and the relevance of the WTO as a multilateral organization will be lost.
- It underscores the rule of law and makes the trading system more secure and predictable
Additional Information:
Reports Published by WTO:
- World Trade Statistical Review
- World Trade Report
- Global Trade Outlook
- Goods Trade Barometer (Earlier known as World Trade Outlook Indicator)
Sources:
Restoring the World Trade Organization’s crown jewel – The Hindu
Yojna daily current affairs eng med 11th July 2023
Q1. With reference World Trade Organization, consider the following statements:
- The World Trade Organisation came into existence from 1st January 1948.
- The highest-ranking decision-making body of the WTO is the Ministerial Conference, which meets every two years.
- The WTO also oversees trade in services such as telecommunications and banking, as well as other issues such as intellectual property rights.
Which of the statements given above is/are NOT correct?
(a) 1 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Answer: (a)
Q2. Consider the following:
- Trade & Development Report
- Goods Trade Barometer
- World Trade Report
- Global Trade Outlook
- World Economic Situation and Prospects
How many of the above mentioned reports are published by the World Trade Organization?
(a) Only one
(b) Only three
(c) Only four
(d) All Five
Answer: (b)
Q3. Discuss the structure and significance of the WTO dispute settlement system and analyse the reasons for its non-functionality.
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