Expert Speak Atlantic Files
Published on Apr 15, 2020
Differing approaches to the WTO’s existential crisis: India and the EU

As its 25th birthday rolled in, the World Trade Organization (WTO), received an unpleasant, but perhaps not entirely unexpected, present: a wide-spread breakdown in its functioning. For long it had been called out for opaque and corporate-greed-fuelled negotiations, but WTO-insiders could at least take heart in the fact that the organization’s dispute settlement system (DSS) was not only functioning smoothly, but in terms of usage and jurisprudence developed, had far surpassed its peers like the International Court of Justice (ICJ) and the International Criminal Court (ICC). However, after 11 December 2019, this little comfort too went out the window, with the complete asphyxiation of the DSS’s appeal mechanism. There is now fairly ubiquitous concern regarding the future of the ‘rule of law’ in trade relations, and some suspect that we may be on our way to the ‘GATT era’, where power-politics, not the letter of the law, determined who was right.

In such a situation, WTO officials urged sensible reform in both mild, and strict tones. However, the purpose of this piece is not to explore the universe of problems plaguing the WTO; suffice to say they are many. Instead, it seeks to briefly lay out the actions taken – i.e. demands made and suggestions forwarded – but two major players: India, a self-styled voice of the ‘global south’, and the European Union (EU), a collective that prides itself in promoting not just free, but also fair, trade. Both players see the benefits the WTO brings and wish for the organization to continue operations. However, both agree that for that to happen, sweeping changes need to be made – the only problem is: they disagree on what these changes should be.

For India, the biggest substantive issue remains the forgotten Doha promise. The only negotiating round conducted under the aegis of the WTO was supposed to highlight problems faced by developing countries; however, for various reasons (and both sides blame one another), developed and developing countries could agree to very little. Instead, the former group proposed negotiations on ‘new issues’ like e-commerce and investment facilitation, which has generally been opposed by India. New agreements cannot be signed, it says, until old issues are resolved. This position was exemplified in 2013, at Bali, when India threatened to torpedo the almost-clinched Trade Facilitation Agreement (TFA) till its concerns over food security were addressed. This resulted in a ‘peace clause’ – an understanding that India could exceed its subsidy-granting limits for certain crops (recently operationalized for the first time in light of the Coronavirus situation), and that this would not be challenged by others under the DSS.

As a speaker for developing countries, India has also strongly resisted efforts by countries like the United States (US) to straightjacket the definition of ‘developing countries’, who are otherwise granted some flexibilities in rule-implementation. In response to US’s demand to insert ‘objective criteria’ to determine which countries qualify, India (along with four others) pushed to keep the status ‘self-declaratory’: it presented figures such as per capital income and capacity constraints, and alleged that the developed bloc was “kicking away the ladder”, especially given that previously developed countries received ‘reverse’ relaxations and waivers. As a negotiating modus, India is strongly committed to the ‘consensus principle’ (one Member one vote, and decisions to be taken only by consensus), and has not been a part of plurilateral talks for the Trade in Services Agreement (TiSA) and the Information Technology Agreement – 2 (ITA 2), notwithstanding those that opine that given India’s relative strength in these areas, it should be involved in these negotiations, in the least, in order to influence the outcome.

Finally, with respect to the DSS, India has been highly critical of the US’s approach of blocking appellate appointments in bad faith, and has organized ‘mini-ministerials’ in Delhi to garner consensus regarding away forward. In 2018 it co-sponsored two submissions, with the EU, setting out its main concerns as well as some possible solutions regarding, inter alia, concerns about judicial-overreach and delays in release of dispute rulings. However, in what some can read as a telling statement, the trade minister recently declared in Parliament that India was under “no obligation” to implement a recent ruling against it, given the non-functioning of the appeal system: one can wonder to what extent this is in good faith.

As for the EU, currently it seems to be mainly preoccupied with keeping the DSS intact. To that end it has been an active submitter of proposals, hoping to bring the US to a constructive dialogue. It was however wary of the side-deal struck between US and China to halt their trade war. And when it realized that nothing could save the appeal mechanism (as originally intended) it found a creative legal solution by using a rarely-used, barely-known WTO provision to establish a parallel system for appeals. Initially partnering up with Canada and Norway, the EU has brought this arrangement to the approval of 15 signatories (India not being one of them, though interestingly, China is). On substance, it is a strong proponent of discussing e-commerce and investment and has often criticized developing countries for not joining (and sometimes not allowing) the conversation. Further, state subsidization is its big concern: it feels that current rules are insufficient to reign in (Chinese) ‘state-owned enterprise’ (SOE) subsidies, and in its 2018 ‘concept paper on WTO modernization’ it expressed disappointment at the low level of subsidy notification, even suggesting “sanctions for wilful and repeated non-compliance”. Finally, while not as persistent as the US, the EU too does not favour ‘undifferentiated’ developing country status and has urged Members to graduate, so that relaxations can be “needs driven and evidence based”.

In all, a well-functioning WTO, that takes care of all sides, is a priority for all countries – if, for nothing else, than the fact that the modern global economy requires an umpire. Fixing the system and not toppling it should be the priority of both India and the EU. While the EU is mostly transparent and well-organized in trade-policy, India has been previously criticized for uncoordinated decision making. This was evident from its recent last-minute departure from the Regional Comprehensive and Economic Partnership (RCEP) table. However, given that for the first time in living history, US’s hegemonic position seems to be crumbling, the time is ripe for India and developing countries to increase their say in global economic governance. ‘Let no crisis go to waste’, as the old saying goes, and the problems at the WTO are an opportunity to build a better global organization, and for India and EU to assume responsible, forward-looking roles, that cement their positions as true global leaders.

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.


Akhil Raina

Akhil Raina

Akhil Raina is a Marie S. Curie Fellow and PhD candidate at the Leuven Centre for Global Governance Studies (GGS) KU Leuven. He is an ...

Read More +