Economy

WTO Appellate Body’s non-functionality could hit poorer countries more

Amiti Sen New Delhi | Updated on December 11, 2019 Published on December 11, 2019

Representative image   -  Getty Images/iStockphoto

WTO DG Azevedo says interim arrangements will play a key role in dispute settlement now but search for permanent solution will be on

Experts said that the loss of the World Trade Organisation’s (WTO) powers to settle trade disputes, after the number of the judges at the Appellate Body was reduced to only one instead of the mandatory three on Wednesday, could hurt developing countries like India the most.

They said that these countries will now be prone to more bullying by rich countries over trade disputes.

“India has on-going disputes at the WTO where the judgement was likely go in its favour. The panel ruling on steel subsidies dispute filed by the US, for instance, seemed to be favourable for India on several important aspects. But it will hold no meaning now as a request for Appellate Body examination of the case would lead to its indefinite suspension,” an official involved in WTO matters told BusinessLine.

The reduction in the number of judges in the Appellate Body to one on December 11, following the end of the term of two judges, has made the apex decision making body of the WTO dysfunctional. The US has been blocking the appointment of new judges over the last couple of years. In fact, the number of judges has been gradually reduced from seven to one.

The US has done so to protest the Appellate Body’s alleged overreach of its authority and, in effect, creation of new trade laws. Washington also accused the WTO of often giving unfair judgements against the US and in favour of competing countries like China.

Some policy watchers argue that India, too, could benefit from the situation as certain difficult cases, such as the one against its export subsidies, will now get indefinitely delayed. Others, however, say that developed countries are so powerful that they could make developing countries change their rules based only on panel rulings even though it may not be formally enforceable if the case is forwarded to the Appellate Body.

“India already has a plan to replace its export sops with incentives that are WTO compliant despite the fact that it has already filed an appeal with the Appellate Body against the dispute panel’s adverse ruling on the matter. This is because the US is putting pressure bilaterally on India on the matter,” the official said.

The dispute settlement mechanism was a big handle that developing countries could use to put pressure on developed countries against unfair trade, said Biswajit Dhar, Professor, Jawaharlal Nehru University. “With the Appellate Body now losing its functionality, developing countries don’t have a mechanism to pull up the developed countries. Developed countries, on the other hand, can use their muscle power to get things done bilaterally,” Dhar added.

WTO Director General (DG) Roberto Azevedo, at a press conference on Tuesday evening in Geneva, said the members will continue to resolve WTO disputes through consultations and panels. “They will also use other mechanisms envisaged in the WTO agreements to resolve disputes and review rulings such as arbitration or good offices of the DG. Interim arrangements have a main role to play now and I know that many members are discussing these kind of arrangements,” Azevedo said.

But the WTO members have been quite clear in their desire to have a two-step review process, he added. “So our duty is to find and deliver a durable solution,” the DG stated.

Published on December 11, 2019
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