The World Trade Organisation (WTO) is regarded as the world’s largest international economic institution as of 2021, it has 164 member countries. It superseded the 1947 General Agreement on Tariffs and Trade (GATT) which was created after the Second World War. The WTO functions on the basis of the trade agreements that are signed between nations and it mainly aims at facilitating and managing businesses and trade relations. In recent times, the main question that has been plaguing us is whether the WTO has failed as a multilateral agency to promote international trade. In this article, I shall be exploring this question.
When we talk about success and failure, it is important to note that these terms are subjective in nature. What might be considered a success by the developed countries may be regarded as otherwise in a developing or underdeveloped country. In regards to the WTO, the question we should be asking ourselves is what are the things that we expect from an international trade policy. The amateur answer would be increasing the gross domestic product (GDP) of countries. However, it doesn’t end here. Rather it must not end here because trade policies should be much broader in their aims and should take into consideration the different ways in which it could lead countries on the path of equitable, just and sustainable development while paying close attention to the labour rights and environmental needs. The WTO, on several occasions, has reiterated the strong association between sustainable development and international trade and has outlined the harmful effect that trade openness has on the environment. However, it has done little to discourage nations from including trade openness in their policy. Saudi Arabia, which joined the WTO in 2005, has become one of the first worldwide carbon dioxide per capita emitter countries and has not done anything to examine the negative impact of trade openness on its sustainable development. Additionally, the WTO has failed to incorporate labour standards into international trade standards mainly because there is a raging debate between the member countries, on the issue of incorporating labour standards prescribed by the ILO, in the WTO mandate. As a result, no effective policy changes have been implemented in this regard. In several meetings, the incorporation of international labour standards has been dubbed as a “non-tariff barrier” to trade and the baton has been passed to the ILO. This reflects a slack attitude on the part of the WTO because the ILO is only a deliberative body and is incapable of taking any real action.
Therefore, terming the WTO’s work as a success would be a paradoxical statement. From the point of view of the developed Western World, the WTO has succeeded but if we look at it from the perspective of the underdeveloped and developing world where people live in abject poverty, the WTO’s success seems questionable. The success which it has seemingly attained only benefits the capitalist class. A probable reason for this is that there is a structural problem in this organisation because it is ordered in a way to promote monopolistic competition rather than free trade. By merely saying that the WTO “promotes trade” we cannot dismiss the negative impact its policies have on developing countries. In fact, the WTO’s policies have also been brought under scrutiny in instances where trade has been conducted under fairer and more equitable conditions outside the WTO setting. An example of this would be the US-Cambodia Free Trade Agreement under which Cambodia managed to secure much better negotiations that managed to favour its economic goals rather than only benefiting a superpower like the US.
The problems which were seen in the GATT era, still persist as neocolonialism continues to gain ground. If we look at how decisions are made, it is evident that the institution is unable to ensure equality in decision-making power as the system is still based on the degree of power which a country possesses in the global sphere. On paper, there is a one-member, one-vote system in the WTO but it has never been used. This is much like the situation in the United Nations where the interests of the powerful prevail over the needs of the world. This is the fundamental problem in the working of the WTO as the weaker nations are not in a position to negotiate trade deals in their favour which is manifested in several ways, right from basic resource issues like the inability to establish permanent delegations in Geneva.
It is a known fact that the majority of the countries are excluded from the “informal decision-making sessions” that occur within the institution through “green room deals” which are dominated by powerful countries and frequently lack transparency. In the instances, where the developing countries are included, decision-making more often than not, becomes coercive in nature. A classic example of this would be the Doha Round of Trade Talks (2001-2006) which aimed to “prioritise the issues of the less developed countries” but ultimately ended up promoting bilateral trade agreements between the US and the European Union because of their superior negotiation power. The undemocratic nature of these discussions was also reflected in the location that was chosen to conduct the conference. It was very evident that such a location was chosen to avoid the scrutiny of the world media and the opposing parties. The failure of the Doha Conference only reiterated the fact that the rich countries of the world could still protect themselves from goods produced by the poorer nations.
The very process through which negotiations are conducted becomes a hindrance to the promotion of free trade in the developing world. There have been instances to prove that developing nations are coerced into accepting new policies or trade deals in return for some remedial action in the form of meagre concessions. For example, the developing countries accepted the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement of 1996 in return for “modest agricultural liberalisation” in the form of access to the Western markets. In such situations, we are also confronted with the lack of skill and ability of the developing nations to crack a trade deal that profits their nation equally.
Another way in which the inequality of power is exacerbated in the WTO is in the way the disputes are resolved through the Dispute Settlement Understanding (DSU). A large part of the problem in this dispute resolution mechanism is that the ultimate reaction to any trade dispute is retaliation in the form of economic sanctions. It is necessary to understand that the political and economic implications of such punitive measures are far greater in developing countries than in developed countries. The developing nations are always in a vulnerable position as the power is concentrated in the hands of the developed nations and thus, in most cases, they accept the unilateral decisions that are taken, out of fear of retribution from the developed countries.
DISPUTE RESOLUTION MECHANISM OF THE WTO
In conclusion, we can say that the WTO has predominantly benefitted the Western developed countries and it will continue to do so to ensure its longevity. It is imperative that the WTO changes its current system which is based on profitable accumulation and is completely devoid of the needs of the developing world. Only then, will it be able to truly succeed as a multilateral organisation in promoting sustainable trade.
Aradhana Banerjee
Writing Mentorship, 2021
References
1. www.thediplomat.com 2. www.e-ir.info 3. www.wto.org 4. www.investopedia.com
When we talk about success and failure, it is important to note that these terms are subjective in nature. What might be considered a success by the developed countries may be regarded as otherwise in a developing or underdeveloped country. In regards to the WTO, the question we should be asking ourselves is what are the things that we expect from an international trade policy. The amateur answer would be increasing the gross domestic product (GDP) of countries. However, it doesn’t end here. Rather it must not end here because trade policies should be much broader in their aims and should take into consideration the different ways in which it could lead countries on the path of equitable, just and sustainable development while paying close attention to the labour rights and environmental needs. The WTO, on several occasions, has reiterated the strong association between sustainable development and international trade and has outlined the harmful effect that trade openness has on the environment. However, it has done little to discourage nations from including trade openness in their policy. Saudi Arabia, which joined the WTO in 2005, has become one of the first worldwide carbon dioxide per capita emitter countries and has not done anything to examine the negative impact of trade openness on its sustainable development. Additionally, the WTO has failed to incorporate labour standards into international trade standards mainly because there is a raging debate between the member countries, on the issue of incorporating labour standards prescribed by the ILO, in the WTO mandate. As a result, no effective policy changes have been implemented in this regard. In several meetings, the incorporation of international labour standards has been dubbed as a “non-tariff barrier” to trade and the baton has been passed to the ILO. This reflects a slack attitude on the part of the WTO because the ILO is only a deliberative body and is incapable of taking any real action.
Therefore, terming the WTO’s work as a success would be a paradoxical statement. From the point of view of the developed Western World, the WTO has succeeded but if we look at it from the perspective of the underdeveloped and developing world where people live in abject poverty, the WTO’s success seems questionable. The success which it has seemingly attained only benefits the capitalist class. A probable reason for this is that there is a structural problem in this organisation because it is ordered in a way to promote monopolistic competition rather than free trade. By merely saying that the WTO “promotes trade” we cannot dismiss the negative impact its policies have on developing countries. In fact, the WTO’s policies have also been brought under scrutiny in instances where trade has been conducted under fairer and more equitable conditions outside the WTO setting. An example of this would be the US-Cambodia Free Trade Agreement under which Cambodia managed to secure much better negotiations that managed to favour its economic goals rather than only benefiting a superpower like the US.
The problems which were seen in the GATT era, still persist as neocolonialism continues to gain ground. If we look at how decisions are made, it is evident that the institution is unable to ensure equality in decision-making power as the system is still based on the degree of power which a country possesses in the global sphere. On paper, there is a one-member, one-vote system in the WTO but it has never been used. This is much like the situation in the United Nations where the interests of the powerful prevail over the needs of the world. This is the fundamental problem in the working of the WTO as the weaker nations are not in a position to negotiate trade deals in their favour which is manifested in several ways, right from basic resource issues like the inability to establish permanent delegations in Geneva.
It is a known fact that the majority of the countries are excluded from the “informal decision-making sessions” that occur within the institution through “green room deals” which are dominated by powerful countries and frequently lack transparency. In the instances, where the developing countries are included, decision-making more often than not, becomes coercive in nature. A classic example of this would be the Doha Round of Trade Talks (2001-2006) which aimed to “prioritise the issues of the less developed countries” but ultimately ended up promoting bilateral trade agreements between the US and the European Union because of their superior negotiation power. The undemocratic nature of these discussions was also reflected in the location that was chosen to conduct the conference. It was very evident that such a location was chosen to avoid the scrutiny of the world media and the opposing parties. The failure of the Doha Conference only reiterated the fact that the rich countries of the world could still protect themselves from goods produced by the poorer nations.
The very process through which negotiations are conducted becomes a hindrance to the promotion of free trade in the developing world. There have been instances to prove that developing nations are coerced into accepting new policies or trade deals in return for some remedial action in the form of meagre concessions. For example, the developing countries accepted the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement of 1996 in return for “modest agricultural liberalisation” in the form of access to the Western markets. In such situations, we are also confronted with the lack of skill and ability of the developing nations to crack a trade deal that profits their nation equally.
Another way in which the inequality of power is exacerbated in the WTO is in the way the disputes are resolved through the Dispute Settlement Understanding (DSU). A large part of the problem in this dispute resolution mechanism is that the ultimate reaction to any trade dispute is retaliation in the form of economic sanctions. It is necessary to understand that the political and economic implications of such punitive measures are far greater in developing countries than in developed countries. The developing nations are always in a vulnerable position as the power is concentrated in the hands of the developed nations and thus, in most cases, they accept the unilateral decisions that are taken, out of fear of retribution from the developed countries.
DISPUTE RESOLUTION MECHANISM OF THE WTO
In conclusion, we can say that the WTO has predominantly benefitted the Western developed countries and it will continue to do so to ensure its longevity. It is imperative that the WTO changes its current system which is based on profitable accumulation and is completely devoid of the needs of the developing world. Only then, will it be able to truly succeed as a multilateral organisation in promoting sustainable trade.
Aradhana Banerjee
Writing Mentorship, 2021
References
1. www.thediplomat.com 2. www.e-ir.info 3. www.wto.org 4. www.investopedia.com
