New Delhi: The 11th ministerial conference (MC11) of the World Trade Organization (WTO) is set to be a damp squib with no major outcome expected on its final day on Wednesday.
While failure to reach consensus on issues is not new to the WTO which took 18 years to sign its first trade deal in Bali in 2013, a deadlock on key issues at Buenos Aires could have altogether different ramifications as it questions the basic principles on which the WTO functions.
After the Trump administration took over the White House, the US has turned its cards from being the champions of globalization and free trade to an inward-looking economy.
The US is now questioning the very basic principles on which WTO is founded. The rules-based system that drive WTO through the dispute settlement mechanism which was so far the only arm of the multilateral body that was well-oiled and was doing its job efficiently is now being questioned by the US.
The US trade representative Robert Lighthizer in his speech at the plenary session of the MC11 on Monday said the WTO was losing its essential focus on negotiation and becoming a litigation-centered organization.
“Too often, members seem to believe they can gain concessions through lawsuits that they could never get at the negotiating table. We have to ask ourselves whether this is good for the institution and whether the current litigation structure makes sense," he added.
The US wants to go back to the pre-WTO system where abiding by a verdict of the dispute settlement mechanism was not binding and the winning country has to sit down and negotiate for a give-and-take with the losing party, which could give more power to large developed countries to arm-twist their small economic partners.
It has blocked appointment of new members to the dispute settlement body under the consensus-driven WTO which has only four members in a body meant to have seven and another member is set to retire soon. If not resolved immediately, members feel this could throw the multilateral trade body into a crisis.
The US has also questioned the special and differential treatment enjoyed by large developing countries like India which gives them more time to comply with WTO rules than the developed countries.
While the US considers it unfair given the size of the Indian and Chinese economies, India argues that it has to be treated differently as it has to take care of its small and marginal farmers as well as the large number of people living below poverty line.
This fundamental difference in approach could also prove fatal for achieving any progress at a multilateral forum.
While a permanent solution on public stockholding for food security purposes would have given more legal certainty and flexibility to India to run its food security programmes, India’s current public distribution system will not be impacted by the indecision as it is protected under a previous agreement reached at Bali in 2013 that runs for perpetuity.
However, the onerous notification obligations under the Bali deal which India sought to do away with could pose practical challenges of using the so-called Bali peace clause.
India has warned that an imminent failure to agree to a permanent solution on the matter may irreversibly damage the credibility of the multilateral body and pose a severe threat to the successful conclusion of the biannual conference.
India could now oppose vehemently any new issue proposed at the WTO such as e-commerce unless it gets a permanent solution which was promised to be delivered by MC11.
The language of the ministerial declaration later on Wednesday which needs to be consensus driven will give us a better sense of where the WTO is headed.