Author : Aarshi Tirkey

Occasional PapersPublished on Sep 02, 2019 PDF Download
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The WTO dispute settlement system: An analysis of India’s experience and current reform proposals

  • Aarshi Tirkey
Attribution:

Aarshi Tirkey, “The WTO Dispute Settlement System: An Analysis of India’s Experience and Current Reform Proposals”, ORF Occasional Paper No. 209, September 2019, Observer Research Foundation.

Established in 1995, the World Trade Organization’s (WTO) Dispute Settlement System (DSS) is used to resolve trade-related disputes between WTO member states. It has received over 500 complaints since its inception, and utilises both political negotiation and adjudication for dispute resolution. Today the DSS faces an unprecedented crisis due to US obstruction, which may render the system effectively dysfunctional by late 2019. It is likely that any solution to the ongoing crisis would require the negotiation of wide-reaching institutional and structural reforms between WTO member states. In this context, it is both timely and useful to evaluate India’s experience with the DSS. This paper provides an overview of India’s disputes before the DSS, and examines the various procedural and substantive issues encountered by member states over the years. It analyses recommendations for reform that will be important from India’s perspective as a developing country.

Introduction

The multilateral trading system is facing unprecedented challenges on multiple fronts. The trade and tariff war is digressing from the established rules of trade, and is escalating in the backdrop of a complex set of factors. These include the emerging economic rivalry between the US and China, the surge in protectionist measures, and the deadlock between developed and developing countries regarding the future of trade negotiations.

A major, and perhaps the most perilous threat is being targeted towards the so-called “crown jewel” of the World Trade Organization (WTO), i.e., the Dispute Settlement System (DSS). The DSS is a mechanism to resolve trade disputes between member states, and utilises both political negotiation and adjudication for dispute resolution. The US is actively blocking the appointment of new members to the WTO’s Appellate Body (AB), a seven-member permanent organ that adjudicates appeals within the DSS. Should these vacancies remain unfilled, the AB will be left with only one member by late 2019, leaving the DSS virtually dysfunctional. In a speech in November 2018, WTO Director-General Robert Azevêdo emphasised that the “most urgent issue facing us” is the crisis in the DSS, particularly “the impasse in appointments to the AB”. It is not difficult to hypothesise that with a dysfunctional DSS, countries may resort to unilateral measures to protect their trade interests; this threatens the entire rules-based trading regime.

Established in 1995, the DSS’ journey has been unparalleled in terms of the sheer numbers and variety of cases it has had to adjudicate. However, over the years, member states have expressed concerns regarding various procedural and substantive aspects of the DSS. These include, inter alia, the term of appointments of the AB members, the acceptable standards of review in disputes, and the need to streamline the appellate procedure. Some of these concerns are shared uniformly among member states and can be rectified if countries can reach the critical threshold of consensus for decision-making.

The US has been the only country to challenge the DSS in a manner that effectively disrupts its functioning. The US’ 2018 Trade Policy Agenda enumerates its issues with the DSS, which are more or less aligned with the concerns raised by other countries mentioned above. This begs the question of whether the US has any other deep-seated concern with the DSS. A 2005 US proposal (reiterated in 2007, and again in the 2018 Trade report) puts forth an unconventional set of reforms that aim to increase the control of member states over DSS decisions, thereby allowing them to bilaterally modify, review and delete parts of the rulings. The US’ grievances can be further understood in the context of US President Donald Trump’s statement – though contested by scholars – alleging that the US “loses almost all of the lawsuits in the WTO.” Should these reforms be accepted, it will undermine the rule-oriented nature of the DSS and give way to an unequal, power-oriented system. It remains to be seen whether the US’ true agenda is to push for these specific proposals or to incapacitate the WTO and coerce countries to abandon it.

It is difficult to predict how the ongoing crisis will be resolved, if at all. What can be posited is that the only lifeline for an institution in crisis is the possibility of negotiating a package of mutually acceptable, institutional and structural reforms.

What should be India’s position in this regard? As one of the most active participants of the DSS, India has stakes in the ongoing crisis at the WTO. It not only needs to ensure that the DSS continues to survive, but also make efforts to preserve the interests of developing countries and least developed countries (LDCs). It is therefore both timely and useful to evaluate India’s experience with the DSS, and identify areas for reform to enable the DSS to function effectively and efficiently.

The paper first gives a brief description of the DSS process. It provides a broad, statistical overview of India’s disputes and analyses the trade measures, industries and countries with which India frequently has disputes with. The second part of the paper will look at suggestions and recommendations for reform, which will enable the DSS to function in a manner that fulfills its mandate and meets the expectations of its member states.

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Contributors

Aarshi Tirkey

Aarshi Tirkey