WTO and the Future of Multilateral Trade: Role, Reforms & UPSC Notes

World Trade Organization (WTO) connections with India are among the twenty-three original contracting countries to the General Agreement on Tariffs and Trade (GATT). Thus, it became an automatic member of the World Trade Organization (WTO), which superseded GATT on January 1, 1995, following the conclusion of the Uruguay Round of negotiations in 1994.

The WTO and multilateral trade governance are very crucial to UPSC GS Paper II (International Relations, Institutions, and Policies) and GS Paper III (Indian Economy, Trade, and Globalization). It applies to global governance, international trade negotiations, Indian participation in WTO and economic diplomacy. Enroll in the UPSC coaching now and become a better preparer.

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What Role Does the WTO Play in Shaping Global Trade Dynamics?

The WTO protects a rules-based global trade system by negotiating, ensuring commitments are met, solving conflicts via a settlement process, and being transparent. It makes the process of international commerce stable, predictable and inclusive, leading to cooperation between member states.

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About

Established in 1995, the WTO replaced the GATT (1947). It has 164 members, covering more than 98% of global trade. It works through a consensus-driven system, focusing on trade liberalization, fair practices, and dispute resolution.

Role

• Facilitating negotiations on trade rules.
• Enforcing global trade commitments.
• Acting as a dispute settlement body.
• Promoting development and capacity-building in developing nations.
• Enhancing transparency through trade policy reviews.

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What are the reasons for hindering an effective WTO from cultivating multilateral trade?

Failure by the dispute settlement mechanism to fully settle disputes in the WTO, inability to have trade negotiations settled due to deadlock, and the emergence of regional trading blocs impede the workability of the WTO in fostering multilateral trade. Further, its role is undermined by expanding protectionism and antiquated regulations on key emerging areas, such as digital trade and climate.

• Dispute Settlement Paralysis: The Appellate Body has been non-functional since 2019 due to the US blocking appointments, eroding trust in the WTO’s rule-based system.
• Negotiation Deadlock: The Doha Development Round has stalled, reflecting divisions between developed and developing nations over agriculture, subsidies, and services.
• Rise of Regional Trade: Proliferation of mega-regional agreements (e.g., RCEP, CPTPP) undermines multilateralism.
• Rise of Protectionism: Trade wars, tariff hikes, and unilateral measures (e.g., US-China tensions) weaken the WTO's authority.
• Gaps in Addressing Evolving Trade Dimensions: WTO rules lag in digital trade, climate-linked measures, and global supply chain disruptions.

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Which Reforms are Essential to Empower the Role of the WTO against a Changing Trade Environment?

The specific reforms that the WTO needs to achieve are the rejuvenation of the rule-based dispute settlement mechanism of the WTO, amplification of transparency in trade-related policies, and the modernization of rules to include digital trade and sustainability. It is also essential to strengthen inclusivity and bring continuity to changes to fit the changing trade realities on a global scale.

• Reinvigorate Rule-Based Dispute Resolution: Reconstitute the Appellate Body, make appointments in a timely way and increase efficiency.
• Rebuilding Trust: Transparency, high-quality trade policy reviews, and reporting, to guard against non-compliance and non-transparent protectionism.
• Collaboration with Other Bodies: Liaise with the IMF, the World Bank and UN agencies to address cross-cutting global problems.
• Institutionalize reform processes: institutionalize ongoing institutional reforms to mirror new trade realities.
• Towards Equitable Globalization: The developing and least-developed countries are to be ensured that forms are applied to their advantage in terms of equitable integration.

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What Part Can India Play in Reaffirming Multilateral Trade Governance?

The next opportunity relates to India, which is possible. In India, to reinvigorate multilateral trade governance, it should support the interests of the Global South, balance national protectionism and global liberalization, and enable sustainable and inclusive trade. It may also be used as a guide to an economy that can support reforms in the WTO.

• Global South Champion: Push fair rules on food security, subsidies and capacity-building.
• Maintaining a Middle of the Road Policies, Protectionism or Liberalization: Provide domestic protection on one hand, yet promote reliable, open markets on the other hand.
• Advocate of Sustainable and All-Inclusive Trade: Activate balanced climate-connected trade regulations and digital inclusivity.
• Presentation as a Model Economy: Provide an example of sustaining growth with equity, resilience, and responsible globalization as a middle way to the emerging economies.

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Conclusion

WTO is crucial to maintaining a rules-based and transparent multilateral export trading framework, but is under severe duress in the 21st century. There is a need to bring reforms to restore its credibility and keep up with the new realities in trade. India, an emerging economic power and the voice of the Global South, can take a prime role in shepherding the WTO reforms in the direction of inclusiveness and sustainability.

Check out the article on Trade Facilitation Agreement (TCA) here!

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