Is the WTO relevant?

• The Trump administration’s’reciprocal tariffs’ are compared to the 1930s’ Smoot-Hawley tariffs, which may have accelerated the Great Depression.

• The World Trade Organization (WTO) was expected to oversee and enforce global trade rules, but it has been criticized for losing its compass and needing significant reforms.

• The WTO’s negotiating function, dispute settlement function, and trade monitoring function are not performing as expected.

• The Appellate body or the dispute settlement mechanism (DSM) has been rendered dysfunctional, with the U.S. blocking appointments to the Appellate body since Barack Obama’s time.

• The WTO’s trade monitoring function is not being performed efficiently due to opacity about trade measures from many members, particularly one big member.

• The Trump tariffs are occurring at a time when the multilateral trading system has become toothless and inefficient.

• Mark Linscott agrees with Ambassador Kumar that the WTO has been sidelined and its diminishing relevance goes back long before the first Trump administration.

• The WTO is not in a position to stem any global economic decline and is not a forum for nations to come together and find solutions.

• The principle of ‘consensus’ is proving to be a problem, with two countries opposing voting on the issue.

• The European Union proposed arbitration proposal on dispute settlement, which has not found universal favor.

The Impact of Tariffs on the WTO and Economic Crisis

• The WTO’s Article 1, MFN, is the foundation of the multilateral trading system. Free trade agreements (FTAs) must be approved by the WTO.

• Tariffs indicate the U.S.’s withdrawal from the WTO system and introduce uncertainty and complexity.

• The U.S. has lowered its average tariffs over many rounds of trade negotiations, leading to grievances from the Trump administration.

• The Biden administration maintained Section 232 (tariffs on steel and aluminum) and Section 301 (tariffs against China) while the Trump 2.0 administration introduced more radical circumstances.

• Countries began negotiating FTAs in the late 1990s and early 2000s, and many countries found it easier to negotiate on tariffs bilaterally than at the WTO.

• India has objected to certain aspects of the WTO, such as agriculture subsidies and domestic support.

• India’s opposition to these agreements is due to the difficulty of negotiating bilaterally on subsidies.

• China’s entry into the WTO was not anticipated to address the challenges it would pose and its dominance as an export juggernaut.

• The WTO’s rules were not foreseen to consider excess capacity and how one country could flood the market and distort trade.