WTO member countries are unlikely to reach a consensus next month on reforming the dispute settlement system of the global trade body as there are wide differences over the issue between developed and developing countries, a GTRI report said on Sunday.
The trade minister of the 164-member World Trade Organisation (WTO) will gather in Abu Dhabi in February for the 13th ministerial conference (MC) to resolve different issues such as reforms in dispute settlement mechanisms, agriculture-related matters and a moratorium on customs duties on e-commerce trade.
"Reaching a consensus on reform of the dispute settlement system is complex, with developed and developing countries holding different priorities and concerns," economic think tank Global Trade Research Initiative (GTRI) said.
It said that balancing India's demands for an appellate body, S&DT (special and differential treatment) provisions, and fairness while addressing other members’ concerns, including transparency and legal certainty, will require significant compromise and negotiation.
GTRI Co-Founder Ajay Srivastava said that for India, reforming the dispute settlement system remains a crucial priority at the upcoming MC13. MC is the highest decision-making body of the global trade watchdog. Reforming the dispute settlement mechanism is essential, as without a reliable way to resolve conflicts between countries, WTO rules are ineffective.
"The US, a frequent participant in WTO disputes, has been obstructing the process due to dissatisfaction with inefficiencies and perceived overreaches by the WTO’s judiciary," he said.
Since 2017, the US has been blocking the appointment of new judges to the WTO’s seven-member appellate court, leading to 29 unresolved appeals.
"This stalemate highlights the need for reforms in the WTO’s dispute resolution system," Srivastava said, adding India’s top priority is to reestablish a fully functional appellate body.
India calls for a transparent and merit-based process for selecting members, ensuring diversity and expertise.
The report said that India recognises the need to improve the functioning of the Appellate Body and for that, it has suggested setting stricter timelines for decisions, clearer rules for judicial restraint, and focusing reviews on legal and procedural issues.
The report also said that terminating the moratorium on imposing customs duties on e-commerce trade is facing strong opposition from developed countries, particularly those with large e-commerce industries.
"Reaching a consensus at MC13 will require significant compromise and negotiation. Expect extension by two more years," it said.
The ongoing moratorium on customs duties on electronic transmissions, in place since 1998, is a contentious issue facing the WTO and a key focus point for India at the upcoming MC13.
India, alongside several other developing nations, has historically called for the termination of the moratorium and has specific demands at MC13 to achieve this goal.
Members have agreed to extend the current moratorium, which prohibits imposing customs duties on electronic transmission, until the 13th Ministerial Conference.
This moratorium has been supported by 105 countries, including the US, the UK, Australia, China, and Japan. However, India and South Africa opposed this extension.
Electronic transmissions include online deliveries such as music, e-books, films, software, and video games. These differ from other e-commerce products as they are ordered online but are not physically delivered.
Supporters of the moratorium argued that it maintains certainty and predictability for businesses. and consumers, especially during the pandemic.
In contrast, India and South Africa, referencing data from the UN Conference on Trade and Development, claimed that the moratorium leads to a global loss of USD 10 billion per year in potential customs duties, with 95 per cent of this loss borne by developing countries.
“As the longest-running moratorium in WTO history, India argues that its continued extension without concrete progress on resolving underlying concerns is detrimental to developing countries seeking to leverage digital trade for development," the report said.
On the issue of fisheries subsidies, the report said that reaching a consensus on fisheries subsidies at MC13 is far from guaranteed as developed countries may resist India’s calls for differentiated treatment and flexibility.
"Bridging the gap will require significant compromise and willingness to acknowledge the historical and ongoing role of developed nations in depleting fish stocks," it said.
"The likelihood of reaching straightforward solutions to the above issues at the MC 13 appears low, primarily due to the reluctance of developed countries, particularly the United States, to fully adhere to and support the WTO’s rules and systems,” it added.
This resistance weakens the WTO, which is concerning since it is the primary regulator of the global economy’s USD 32 trillion trade.
The report added that despite the challenges faced in the past two decades, where no significant decisions have been made within the WTO, it is notable that over 80 per cent of world trade still abides by WTO rules and most-favored-nation (MFN) tariffs.
“This suggests that, while the WTO’s influence might be under strain, its foundational principles and frameworks continue to guide a substantial portion of international trade,” it said.