The World After the WTO: What's Next for Global Trade?

 

The world seems to be standing at a crucial juncture where political ambitions are challenging the predetermined threshold of trade and economics. Old friends turning into foes and vice versa. The majority of experts failed to understand the real reason for the predicament of Western economies and the relevance of aged, preserved ties of centuries. However, the old saying goes that when two bulls fight, the crop suffers. In economics, the loss of one’s is a gain to someone else. Now forget about the conflict between the US & Russia; the new challenge of existence looms over the WTO. Being the prominent arbitrator of global trade for centuries, it seems to be losing its relevance and existence. Let’s understand why and what will happen after the WTO.

Amid rising tension over the tariff row, US trade envoy Brendan Lynch visited Delhi for bilateral talks on the trade agreement. This discussion seems meaningless due to the adamant behaviour of the Trump government over the forced imposition of a tariff hike on India. Yet India expects that there are several other things that might find their way through dialogue on a common platform. In addition, this session can also decide the future of the WTO if taken into consideration.

• It is worth mentioning that India strongly advocates that plurilateral trades affect multilateral trading systems. Which holds a valid point. Non-participant members are enjoying the facilities given to the most favoured nation in some way or other. Besides, the WTO has to overcome the prowess of strong trade partners. Where decisions are fair and transparent rather than being unilateral and favouring the developed economies.
• The appellate body of the WTO, which acts as a final arbitrator for the settlement of trade disputes, has been inoperative since 2019, as the US has blocked the appointment of new judges. Major economies of the world like the US and China have more prominently taken unilateral trade measures, which go against the principles of the WTO and weaken the system of multilateral trade.
• Another astonishing fact is WTO regulations have failed to prepare a framework and guidelines for modern-day challenges such as data protection and governance, digital commerce and climate-related trade practices and are confined to mere goods-based policies and economy.
• Moreover, the multilateral trade negotiation, which is also known as the Doha Round, has come to a halt for years. And member countries failed to reach a consensus on major issues such as agriculture subsidies and food security.

What's next after the WTO?

• Shifting paradigm through new alliance: Nowadays trade alliances have shifted more toward the mutual interest of the nation and beyond the traditional boundaries of the WTO. The recent news that surfaced on the news is the Trade and Technology Council (TTC), a forum developed to address technologies and trade priorities between the U.S. and the European Union. This will not only challenge the importance of the WTO but also pave the way for other nations to go beyond the said procedural mechanism of trade among countries.

• The Idea of Self-Sufficiency: Unlike international policies, few nations, whether developed or developing, rely on strengthening their domestic industrial performance and setups. Be it the Make in India initiative or Made in America. Such nations provide huge subsidies and incentivise their domestic industries to lessen the supply of international products and services.

• Finding new route for addressing the concerns:- However, a small group of countries with similar interests are also negotiating within the WTO framework. These agreements do not require the consensus of all 164 member nations. The recent example of this can be negotiation on investment facilitation and services and e-commerce. The WTO may integrate such important agreements into its framework, which will not only ensure speedy progress but also be envisaged as a landmark for trade.

• Regional partnership and cooperation: Counties are more aggressively seeking and robusting regional partnership with other nations. Such negotiations and agreements are mainly based on specific trade deals and economic cooperation beyond the current periphery of the WTO. Free Trade Agreements (FTAs), Comprehensive Economic Partnership Agreements (CEPAs) and Economic Cooperation Agreements are examples of these.

After the WTO?

Imagine a world where there is no supreme body to monitor and regulate trade. Dispute settlement will be a major concern, but the situation hit badly for both developed and developing nations. There will be no voice of small nations, and the majority of trade will favour and benefit the bigger countries. However, some major repercussions that will arise in the absence of the WTO would be:

• Augmentation of cost and uncertainty: The absence of the WTO will create a hollowness in global trade, as the rule-based system will become ineffective and meaningless. It will make the situation worse for developing countries failing to participate in the global supply chain. There will be a significant drop in exports and FDI, which will reverse the development trend of such economies.

• Limited Market Access: The WTO has a principle of Most-Favoured-Nation, which allows and gives preference to certain nations to enjoy some additional trade benefits with another. The weaker WTO means that strong economies will overpower small nations and make it harder for them to export their products to other countries. They will be left with selected options for trade benefits.

• Dispute settlement at risk: the dispute settlement mechanism of the WTO protects small nations against unfair trade practices and vulnerability against unilateral actions such as arbitrary tariffs. It also protects nations with no or ineffective resources to mitigate these economic challenges.

• Popularity of Unilateral Agreements: Stronger economies may prefer to pursue unilateral agreements for their own benefits. Such nations can put restrictions or impose tariffs on other nations, leaving very little scope of respite to the weaker nation. This move will help the stronger economies to make their domestic industries robust and reduce the risk and challenges from other nations.

• Regional trade agreements: countries with large integrated blocks such as the European Union will be somewhat insulated from this change, as a weaker WTO will not hamper their economies much. Such nations are guarded with separate enforceable agreements which act as a cushion to protect their trade from global chaos.