India in the WTO

The WTO Dispute Settlement Understanding (DSU) introduced a fundamental change in the transition from the GATT to the WTO. The diplomatic management of disputes under the GATT was exchanged for a highly legalized system of dispute resolution, with binding decisions being effectively enforced through retaliation and counter-measures. The DSU works on the basis of the rule of reverse consensus. A decision issued by a WTO panel or the Apellate Body is automatically adopted unless all WTO members agree by consensus not to do so.

The dispute settlement mechanism of the WTO has been very effective in enforcing compliance with WTO commitments and has been instrumental in making the WTO a powerful and effective trade regime. Developing country members are important beneficiaries of the DSU as it has allowed them to challenge WTO-illegal measures of powerful trading partners and compel withdrawal of such measures against the threat of retaliation.

A review of the DSU is already mandated by a 1994 ministerial decision annexed to the Marrakesh Agreement. The negotiations on review of the DSU are going on, but have not been completed. The Doha declaration mandated that the negotiations should continue in special sessions of the DSB. India is an active participant in these negotiations. Research is needed on these negotiations to provide analytical and research support for the participation of Indian negotiators in the policy-making process. A Chair’s draft on these negotiations is available. It identifies the following issues – third party rights; panel composition (need for a permanent panel roster); remand; mutually agreed solutions; confidentiality; sequencing; transparency and amicus-curie briefs; SDT and developing country interests; flexibility and member-control and the need for effective compliance and the discussion on retaliation versus monetary compensation. These issues can be researched based upon an empirical assessment of Indian participation in the DSU. What have been the challenges and what is needed to help India make even better use of the DSU? The research would require legal doctrinal and qualitative empirical analysis. The normative framework would bring issues pertaining to challenges of developing country participation and effective use of the DSU to bear upon the analysis.

Seema Sapra

Note: This comment is based upon my own ongoing research

The WTO’s so-called “institutional crisis” has led to proposals for WTO institutional reform in international research and policy circles. The Sutherland Report and the Report of the Warwick Commission have both made wide-ranging and specific proposals on WTO reform. The literature diagnoses a dysfunctional WTO with an imbalance between its efficient dispute resolution system and its inefficient and somewhat paralyzed rule-making processes. The nature of the crisis has been variously identified as ranging from a “democratic deficit”, to lack of legitimacy, accountability, transparency and adequate participation. The WTO with 153 members has functioned very differently from the GATT. The old Quad has been replaced by the new Quad and now the new group of 7, which formed the core group in the recently concluded July 2008 mini-ministerial. (India is a member of the new Quad as well as the Group of 7. The core groups have included Australia, Brazil, the European Union, India, Japan, China and the United States.) The old GATT-era power centers have been joined by new power centers, especially the emerging economies. Organized coalitions of developing countries have become effective players with significant success in blocking bad deals, if not similar success in agenda-setting. China adds a whole new pillar to the WTO’s power structure. Research is needed to clarify Indian interests in reforming the WTO and the impact of reform proposals on Indian participation within the WTO. Such research can make policy recommendations on whether and how India can work more closely with a core group of WTO members towards reforming the WTO into a more efficient organization. Having become an important player within the WTO, India has a stake in the system and will be involved in any effort to reform the WTO.

Issues pertaining to WTO institutional reform are almost unknown in India with very little research currently in progress. It is therefore desirable that a domestic research agenda on the WTO also include research on systemic and institutional issues. The objective of this research would be to identify Indian interests in reforming the WTO, and to provide analysis that would enhance both the empirical and the analytical context for possible policy positions by Indian negotiators and for representations within the WTO on issues of WTO reform.

What are India’s interests in reform of decision-making at the WTO?

Despite legal provisions for voting in the Marrakesh Agreement, the WTO has de facto followed the practice of consensus decision-making. Consensus decision-making coupled with the single undertaking principle in an organization with 153 members can make it difficult to negotiate trade liberalization rounds. While efficiency requires negotiations in small groups or concentric circles, inclusiveness and transparency are important to give all WTO Members a stake in the outcome. Some reform proposals advocate moving away from consensus decision-making and the single undertaking principle. Ideas being discussed include various forms of voting including weighted majority, variable geometry, plurilateral and sectoral approaches, the GATS scheduling approach and the critical mass approach. The Sutherland Report and the Warwick Commission have both recommended the creation of a high-level consultative or management board at the WTO to provide direction for members. The role of the Director General and the WTO secretariat in facilitating decision-making in a Member-driven organization like the WTO also needs consideration. An analysis focusing on Indian interests can identify how India can engage with this debate and participate in the definition of productive outcomes. Research must examine both the need for reform of decision-making, as well as what kinds of reforms are desirable and feasible.

The broad framework for the research could include an assessment of the decision-making challenges faced by the WTO and the need for reform; the review of reform proposals; an analysis of Indian interests; and policy recommendations on the reform agenda. An important aspect of the research will include dissemination of knowledge amongst policy-makers and the injection of concerns of Indian policymakers into the debates on WTO institutional reform.

Seema Sapra

Note: this comment is based upon my own ongoing research. 

Doha round negotiations under GATS Article VI:4 are mandated to develop necessary disciplines to ensure that measures relating to licensing requirements and procedures, technical standards, and qualification requirements and procedures do not constitute unnecessary  barriers to trade in services. The fourth and current version of a draft text was circulated in January 2008. With its offensive interests in services, India has been active in these negotiations and has sought to protect its right to regulate services for legitimate reasons while at the same time seeking disciplines on the domestic regulations of its trading partners that act as disguised trade restrictions to committed market access in services.

These negotiations have systemic importance in so far as their outcome could potentially result in a re-balancing of the relationship between market access (Article XVI) and domestic regulation under the GATS. The primary issue under discussion involves the appropriate balance between the right to regulate and the new disciplines that are crafted.  The draft text, though still lacking consensus, contains ambiguous language that might have such systemic impact. Negotiators thus need to proceed with the utmost caution. They must understand the GATS system-wide implications of the negotiations and evaluate the text under discussion from the perspective of how it might be interpreted in future WTO disputes before the Appellate Body. 

The issue acquires greater significance after the Appellate Body decision in the Gambling dispute. In this dispute, the Appellate Body found that US laws prohibiting supply of gambling and betting services by suppliers located outside the United States to consumers within the United States amounted to a WTO inconsistent “quantitative” restriction in violation of US scheduled market access commitments under GATS Article XVI. While the United States seemed to have made a scheduling error in not expressly excluding gambling services from its commitments under the residual head of “other recreational services”, this dispute raised concerns in the literature that the Appellate Body erred in not recognizing the US measure as a “qualitative” regulation under GATS Article VI.

After the Gambling ruling, negotiators must consider whether the new disciplines on domestic regulations might not have the unintended(?) consequence of shifting the present balance in the GATS between domestic regulations and market access. There are provisions in the new draft text which if applicable during the Gambling dispute might well have resulted in a different outcome. Specifically, these include paragraph 3 (in the January 2008 draft) which without qualification recognizes the right of Members to regulate and to introduce new regulations to meet “national policy objectives”. Though the critical right to regulate is already recognized in the GATS preamble, its inclusion in this format in new rules might have far-reaching consequences, if a dispute settlement panel or the Appellate Body were to find in such provision, a need for deference to national policy objectives even when these do not relate to competence to provide the service or to maintaining the quality of the service. The draft text’s unclear treatment of the relationship between the new disciplines and Members GATS schedules is another cause for concern. In the Gambling decision, the Appellate Body left open the question as to where “in the abstract” GATS Article XVI drew the line between qualitative and quantitative measures. Similarly, it did not decide the question of the relationship between the first and second paragraph of Article XVI which is also germane to this issue.  The new disciplines under negotiation would influence the future evolution of GATS jurisprudence on the scope of the right to regulate a service once market access commitments are scheduled. And negotiators must pay attention.

Seema Sapra