The World Trade Organisation is now amidst a crisis for ensuring a legitimate dispute settlement mechanism.
The changes in the global trade regime and the multilateral institutions necessitate a greater role for the developing world.
Why a trade organisation?
The new financial trade order with the coming of Bretton Woods institutions (World Bank and IMF) demanded a trade organisation at the international level.
It became necessary for the regulation of the international monetary system.
It was also needed to establish multilateral rules for the settlement of trade disputes.
Adherence to the rules was expected to serve as an important domestic incentive for governments.
It would allow them to resist protectionist demands and provide for greater legal certainty.
The World Trade Organisation (WTO) was created primarily to address these demands.
How has the US's role been?
The US's push for the creation of WTO was mainly to pursue its own commercial interests.
The U.S. has never truly embraced the idea of a multilateral system in which its leadership could be contested.
Evidently the US is isolating itself from NAFTA, TPP, NATO and UNESCO in the recent times.
In the trade negotiations too, the U.S. put forward excessive demands that countries are unprepared to meet.
So the current crisis with the WTO dispute settlement system largely follows this unequal power formula.
What is the crisis with WTO?
The nature of the trade disputes is now increasingly getting hypertechnical.
Despite this, the WTO currently faces a trade dispute settlement crisis.
The U.S. has systematically blocked the appointment of new Appellate Body members (judges).
This has impeded the work of the WTO appeal mechanism.
It is under great stress with only four working members out of seven normally serving office.
If no appointment is made, the mechanism would be destroyed by December 2019.
It would be left with only one remaining member to tackle a massive number of disputes.
But the Appellate Body requires a core of three members to decide a dispute.
What are the other concerns?
It is to be noted that the WTO dispute settlement mechanism is not a world trade court.
So logically, the process remains political and diplomatic.
WTO members are thus concerned over the politicisation of the Appellate Body appointment and reappointment process.
There is also a concern with the quasi-attribution of permanent Appellate Body seats to the U.S. and the European Union (EU).
Besides, there is concern over the possibility of China finding its way to have a permanent seat.
Cases - Some Appellate Body members continue to hear cases which have been assigned to them during their tenure.
The U.S. has persistently attacked this practice.
However, the blame lies on the U.S. itself, for delay in filling up of vacancies and reappointment of members.
This is indicative of the fact that the US is deliberately pushing the WTO legal mechanism for deterioration.
How is China's prospect?
Despite limitations ensured by US and EU, China has largely benefited from the rules-based WTO system.
It might well be the new WTO leader in the coming future.
China's growing assertiveness, in fact, may be the reason for the U.S.’s hard measures.
Its emerging power and the impact of its commercial domination on other economies are evident.
But how far will China's legitimacy be, among other trading members, remains largely uncertain.
What is the way forward?
The world has changed and multilateral institutions now have to embed these changes.
The current WTO crisis could be a battle to retain control over a Western-centric organisation.
It is high time for emerging economies and the developing world to have a greater say.
They should establish their role in shaping the much needed multilateralism and its institutions.
Source: The Hindu
Quick Fact
WTO Appellate Body
The Appellate Body of the WTO was established in 1995 with its seat in Geneva, Switzerland.
It is a standing body of seven persons.
It hears appeals from reports issued by panels in disputes brought by WTO Members.
The Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel.
The Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB), must be accepted by the parties to the dispute.
