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Why WTO’s on the verge of collapse

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Will WTO shut down in 2020?
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Will WTO shut down in 2020?

After today, the World Trade Organisation will no longer be able to fulfill its role as the arbiter of global trade disputes. The WTO’s powerful appellate body — which upholds, modifies or reverses ruling in trade disputes— is set to lose two judges, who finish their terms on December 10, leaving the panel with just one member. The Trump administration has blocked new appointments to the appellate body, claiming it has overstepped its mandate. The US has also threatened to block the WTO’s budget, which could cause the international organisation with 164 members to entirely shut down on January 1, 2020.

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WTO governs $23 billion in trade
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WTO governs $23 billion in trade

* WTO was founded in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), which was established in 1947.

* While GATT mainly dealt with trade in goods, WTO also covers trade in services and intellectual property, and introduced procedures for dispute settlement.

* WTO rules govern nearly $23 billion in global trade.

* It’s based out of Geneva.

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Dispute settlement mechanism central to WTO
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Dispute settlement mechanism central to WTO

* WTO’s dispute settlement procedures, often called the “crown jewel” of the body, allow for member states to seek action against other members for violating WTO rules.

* Dispute settlement begins with consultations to give the involved parties the opportunity to resolve the dispute themselves.

* If consultations fail, the complainant can seek the establishment of a panel, which will receive submissions from both parties and submit a report of its findings.
* Here’s where the appellate body (AB) comes into play. If a panel report is appealed by any involved party, AB hears appeals and then makes the final and binding decision in disputes. The body has a sanctioned strength of seven, but judge retirements left vacancies that were not filled, leading to the current situation.

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But US, citing unfair treatment, has scuttled WTO
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But US, citing unfair treatment, has scuttled WTO

* Currently, the appellate body only has three judges, which is the quorum required to decide on disputes.

* Since 2018, US has refused to approve appointments to fill vacancies on the appellate body. All appointments require unanimous agreement among WTO members.

* The terms of two judges — US’ Thomas Graham and India’s Ujal Singh Bhatia — will end on December 10, leaving China’s Hong Zhao as the only remaining member.

* The US move has effectively defanged the WTO’s dispute settlement procedure — if any party in a dispute appeals the initial decision, without enough judges in AB, the dispute will remain indefinitely unresolved.

* Not only has the US blocked appointments, it has also threatened to block the WTO’s budget, which could force the body to shut operations entirely on January 1, 2020

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A crippled WTO could hurt Indian interests
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A crippled WTO could hurt Indian interests

* India has several disputes that will be left in limbo if the AB collapses.

* Ongoing disputes include US and Japan complaining of excessive import duties and India pulling up the US for its steel and aluminium tariffs, and fee hikes for non-immigrant visas, including the H-1B. Source: WTO, media reports

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