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Editorial: Continuation of US-China Trade War Put Question Mark Over WTO’s Existence

Port Wings, 11 Dec 2019:

For not able to settle trade disputes (between big trading nations) that affect many more member countries in cascading effect, questions are being raised over the role of the World Trade Organization (WTO).

Even, trade experts feel that WTO lost its ground of being a strict referee due to continuation of trade war between two big powerhouses – China and the USA.

Adding salt to the injury, WTO will be left with only one judge after December 10. According to many media reports, the sorry state of affairs will cripple WTO’s dispute appellate mechanism.

Reports says that US has decided to block the appointment of appellate members (judges) at the WTO at a time of heightened risks to global exports from the ongoing trade war.

Since at least three members are required to hear an appeal, the fate of appeals against 14 rulings of the WTO’s dispute settlement body (DSB) —including on India’s export “subsidies” — remains uncertain. More importantly, the DSB’s rulings won’t be binding on the losing sides unless their appeals are heard and settled. Three of the cases involve India, while the US features in five such appeals.

For India, a staunch advocate of the rules-based multilateral trading system, it will be a mixed bag, to start with. It will be spared the trouble of having to fast restructure some of its contentious trade export schemes, as its November 19 appeal against a DSB ruling in favour of the US against New Delhi’s export “subsidies” is still pending.

However, the US, too, will get some relief, as it has a pending appeal against India’s victory in a case of illegal solar subsidies offered by some American states. Ironically, the US had won a similar case against India in 2016 and New Delhi reworked its solar programmes to comply with the ruling after losing the appeal.

As for fresh disputes, India is in consultations with the EU, Japan, the US, Chinese Taipei, etc over its decision to raise tariffs (up to 20%) on certain ICT products, including mobile phones. Typically, if the consultations fail, the aggrieved parties are free to approach the DSB for the composition of a panel to adjudicate on the case. The panel’s findings can be appealed at the Appellate Body.

What worries analysts is that the Appellate Body goes into a freeze mode when a trade war between the US and China is showing no signs of abating. A non-functional appellate mechanism leaves a greater scope for countries to step up protectionism and disrupt global trade, growth in which is expected to plummet in 2019 to the lowest level since the 2008 financial crisis.

According to Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, if the multilateral system collapses in a few years, then the roots of the collapse can be traced to the demise of the Appellate Body. “Then we all know which country is responsible for it,” added Das.

 

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