The World Trade Organization (WTO), the body meant to ensure smooth and predictable global trade, finds itself at a critical juncture. For years, its dispute settlement mechanism, often called the "crown jewel" of the organization, has been effectively paralyzed, leading to calls for urgent reform and a restoration of its lost authority. India is among the nations most vocal about the need to revitalize the WTO and, in particular, to reinstate a functional dispute resolution system.
The crisis stems primarily from the United States' persistent blocking of appointments to the WTO's Appellate Body, the final court of appeal for trade disputes. This obstruction, which began in 2019, has rendered the Appellate Body unable to hear new cases, leaving trade disputes in limbo and undermining the WTO's ability to enforce its own rules. The U.S. argues that the dispute settlement system has overstepped its bounds, impinging on national sovereignty and issuing rulings that are not always aligned with U.S. interests.
However, many other countries, including India, view the dispute settlement mechanism as essential for ensuring a fair and rules-based trading system. For developing nations, in particular, the WTO's dispute settlement process provides a crucial avenue to challenge unfair trade practices by larger, more powerful economies. Without a functioning mechanism, smaller countries are left vulnerable to unilateral actions and trade bullying.
India has been actively pushing for comprehensive WTO reforms, with the restoration of the dispute settlement mechanism as a top priority. At a recent mini-ministerial meeting in Paris, India's Commerce and Industry Minister Piyush Goyal outlined a three-pronged reform agenda: tackling non-tariff barriers, addressing trade distortions caused by non-market economies, and reviving the WTO's dispute settlement system. Goyal emphasized the importance of preserving the WTO's consensus-based decision-making and special treatment for developing nations, which India sees as cornerstones of the organization's legitimacy.
India has voiced concerns about the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, expressing doubts about its effectiveness. India also firmly opposed efforts to expand the WTO's mandate beyond traditional trade issues, rejecting a China-led Investment Facilitation for Development proposal.
The situation is further complicated by the rise of protectionism and unilateralism in global trade. The U.S., under both the previous and current administrations, has been accused of circumventing the WTO by imposing tariffs and other trade restrictions outside of the organization's framework. This has further eroded confidence in the WTO and its ability to govern international trade.
Despite the challenges, there is a growing recognition among many WTO members of the urgent need to reform the organization and restore its credibility. The European Union, for example, has also been actively working on proposals to reform the dispute settlement mechanism and ensure its continued effectiveness. The WTO Director-General, Ngozi Okonjo-Iweala, has also emphasized the importance of dispute settlement reform.
The road ahead for WTO reform is likely to be long and difficult. Deep divisions remain among members on key issues, including the role and scope of the dispute settlement mechanism, the treatment of developing countries, and the handling of non-trade issues. However, the alternative – a world of unchecked trade disputes and escalating protectionism – is even more daunting. India, along with other like-minded nations, is determined to work towards a revitalized WTO that can once again serve as a strong and effective arbiter of global trade.
