Current Affairs
December 24, 2024

The GATT-ification of the WTO
Syllabus: GS 2: International Relation (Source: The Hindu, 24^th Dec 2024)

Context:
It has been five years since (now end of 2024) the Appellate Body (AB), the second tier of the WTO’s two-tier dispute settlement system, has been non-operational due to the persistent blocking, by the United States, of the appointment of the Appellate Body members.

About GATT (General Agreement on Tariffs and Trade):
The GATT is a foundational international treaty established in 1947 to promote global trade by reducing tariffs, quotas, and other trade barriers. Initially signed by 23 countries, GATT aimed to facilitate economic recovery after World War II, evolved through several negotiation rounds.

 Key Features of GATT:

1. Non-Discrimination Principle: Member countries must apply tariffs equally to all members, ensuring fair trade practices.
2. Tariff Reductions: GATT successfully lowered average tariffs among member nations from over 20% to around 5%.
3. Trade Facilitation: It provided a framework for resolving trade disputes and encouraged multilateral negotiations to further reduce barriers.

Transition:
The Uruguay Round concluded with the Marrakesh Agreement in 1994 (Marrakesh, Morocco on April 15, 1994), which established the WTO as a successor to GATT. It marked a shift from diplomacy-based trade multilateralism (GATT) to a rule-based system (WTO). The World Trade Organization (WTO) was established on January 1, 1995. By the time it transitioned into the WTO, GATT had become a crucial instrument for promoting global trade liberalization, covering approximately 90% of international trade.

About WTO (World Trade Organization):
The WTO commenced operation on 1st January 1995, under the Marrakesh Agreement, signed on 15 April 1994 by 124 nations.

Functions of WTO:

1. Promoting Free Trade
2. Resolving Trade Disputes

Organisational Structure of WTO:

1. Ministerial Conference: It is the highest decision-making body of the WTO, meeting at least every two years.
2. General Council: It oversees the WTO’s day to day operation, and meets regularly at the Headquarters Geneva. It also acts as Trade Negotiations committee, the Dispute Settlement body, and the Trade policy review body.
3. Dispute Settlement Panels: Established to examine specific trade disputes between WTO members and issue reports with findings and recommendations.
4. Appellate Body:

Appellate Body:
It was established in 1995 as part of the WTO under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).

Aim:
It serves to hear appeals from reports issued by panels in disputes between WTO member countries, acting as a higher court for trade-related legal issues.

Structure and Composition:
The Appellate Body consists of 7 members, each appointed for a 4-year term by the Dispute Settlement Body (DSB). Members can be reappointed for additional terms. A Chairperson is elected annually among the members to oversee the Appellate Body’s operations.

 About the Recent WTO Conference:
The WTO for its 13th Ministerial Conference (MC13) in February 2024, raised critical issues such as:

1. Dispute settlement reforms
2. The extension of the e-commerce moratorium
3. Highlights the need to re-evaluate the WTO’s structure and effectiveness.

How is the WTO experiencing a “GATT-ification”?
Following points support it:

1. The WTO is set to miss its target of revitalizing a fully functional dispute settlement system by the end of 2024, with the Appellate Body (AB) remaining non-operational for over five years due to U.S. blockages in appointing members
2. The obstruction began during the Obama administration, escalated under Trump, and continues under Biden, reflecting a bipartisan consensus against the AB
3. Anticipations of a protectionist Trump 2.0 administration could further worsen the situation. Because, in 2018, he imposed a 25% tariff on various Chinese products, indicating a shift towards unilateral trade actions. Trump’s promise to impose further tariffs during his second term.
4. India’s decision to withdraw from the RCEP negotiations in 2019 underscores this trend. Citing concerns about the potential impact on its domestic industries and farmers, India prioritized national interests over deeper integration into global trade frameworks.

Conclusion:
Prof Geraldo Vidigal (international lawyers) said as against the thickening of the legality of international trade relations that we saw from a period of 1995 to 2019, we are witnessing its thinning. The legal revolution of international trade multilateralism that began in 1995 has not only been paused but is being reversed, moving us back to the era of GATT diplomacy. Hence coined term “GATT-ification”.