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. 

The Business Standard reports:

India is keeping its options open on supporting a candidate for the post of WTO Director- General, although Commerce Secretary G K Pillai stated that New Delhi would back Pascal Lamy for a second term.     
“Lamy is going to seek re-election…we are likely to support him,” a senior Commerce Ministry official today said but quickly added, “what decision will finally be taken, ask me closer to the time of elections, not now”.     

Update:

According to Reuters:

The current head of the World Trade Organisation (WTO), Pascal Lamy, is the only candidate to be the next director-general, since no one has emerged to challenge him for the job, a WTO spokesman said on Monday.

Here is a YouTube video featuring Dr. Rajeev Kumar, Director and Chief Executive of ICRIER speaking to the Warwick Commission on ‘The Future of the WTO from an Indian perspective’.

Watch here

This looks like a very interesting paper on a subject where not much has been published.

See Julien Chaisse and Debashis Chakraborty. “Identifying Mutual Interest Areas at World Trade Organisation: a Sino Indian joint perspective” China Report 41.3 (2005): 267-288. Available at: http://works.bepress.com/julien_chaisse/4

Abstract

China and India, in spite of being signatory members of GATT (1948), witnessed a dissimilar experience in the arena of multilateral negotiations and trade. China lost its membership after the withdrawal of Taiwan from GATT in 1950, but gained steady access in the global market since late eighties. India, on the other hand, in spite of maintaining the membership of GATT, never focused on export promotion strategies before late eighties. Both the countries expect further growth in their exports in coming future, as the tariff and non-tariff barriers (NTBs) in member countries are likely to go down in the post-transitory phase of WTO, which started from January 1, 2005 onwards. However the WTO-compatibilities of several domestic polices of both China and India have been questioned by their trade-partners on various occasions and the debate is likely to continue in the future. Moreover, the exports of both of them are subject to various NTBs in principal markets, which are likely to intensify in the future. This bears serious implications on the export potentials of the two countries. Considering the domestic policies of China and India as well as the barriers on them, the paper attempts to identify material and institutional areas where the two countries could jointly negotiate at the multilateral forum. The paper argues that collective bargaining by the two countries on key issues is likely to provide them an edge in future negotiations.

There has not been much discussion of reform of global economic governance in the Indian media. An article on IMF reform by Arvind Panagriya was published in the Economic Times recently. An extract:

This dominance of the developed countries in the decision-making process has undermined the credibility of the IMF to effectively handle the financial flow crises and generated two kinds of responses. On the one hand, countries such as Russia and Argentina chose to effectively default on their loans when hit by financial crises.

On the other hand, countries such as Brazil, China, India and South Korea went on to accumulate large foreign exchange reserves to insure themselves against future crises.

These developments, accompanied by much improved access of the developing countries to private capital markets, have resulted in considerably reduced lending by the IMF. In turn, the Fund has seen its earnings to finance operational expenditures dwindle and now faces severe pressures to downsize. While a case for downsizing can be made on efficiency grounds, gradual weakening of the IMF is perhaps not an optimal outcome.
Today, capital flows freely across a vast array of developed and developing countries. Countries such as India and China, which currently restrict capital flows, are also bound to embrace full capital account convertibility in due course.

Given the imperfect and asymmetric information in the capital markets, the threat of financial crises will continue to loom large, as has been graphically and painfully demonstrated by the subprime crisis. In so far as these crises necessarily spillover from one country to another on account the of interconnected nature of the markets, the case for an effective multilateral institution to promote cooperation is impeccable.

Institutional reform is also long over-due for two other important global institutions – the World Bank and the WTO. A one day dialogue was recently hosted by ICRIER in New Delhi in collaboration with Oxford University’s Global Economic Governance Programme; The Graduate Institute for International and Development Studies in Geneva; and the Emerging Dynamic Global Economies Network, Canada. The South Asia Regional Dialogue on Global Economic Governance and Trade sought to stimulate debate on global trade governance issues, so that leading developing countries have an opportunity to frame their interests and concerns, and shape an evolving agenda. The focus of this meeting was WTO institutional reform. For more details see here.