The GATT-ification of the WTO: A Reversal of Trade Multilateralism
Context:
The World Trade Organization (WTO), established in 1995, emerged as the successor to the General Agreement on Tariffs and Trade (GATT). Unlike the diplomacy-driven GATT (1948–1994), the WTO was envisioned as a platform where trade disputes could be resolved through legal adjudication, fostering predictability and fairness. However, recent developments indicate a reversal of this vision, with the WTO increasingly resembling the pre-1995 GATT system in its structure and functioning—a phenomenon termed the “GATT-ification” of the WTO.
Establishment of the WTO:
- Establishment : The WTO was founded to build on GATT’s legacy while addressing its limitations. It brought an ambitious legal framework, stronger enforcement mechanisms, and an independent Appellate Body (AB) to resolve trade disputes.
- Role & Function: These innovations aimed to institutionalize rule-based multilateralism and ensure that global trade rules were uniformly applied. The WTO’s primary goals were to promote free trade, reduce tariffs, and create a predictable trading environment that would benefit all member nations. For years, the WTO played a pivotal role in facilitating trade liberalization and resolving disputes among its members.
The Unravelling of WTO Multilateralism vis-à-vis U.S.-China Rivalry Since 2001:
- Historical Background
- The United States supported China’s accession to the WTO in 2001, expecting it to adopt market-driven reforms and integrate into the liberal global trading order.
- However, China’s state-led economic policies and practices—such as subsidies to state-owned enterprises (SOEs), intellectual property theft, and trade imbalances—have drawn criticism from the U.S. and other countries. The WTO’s inability to address these issues has fueled discontent, particularly in Washington.
- U.S. Response and Trade Wars
- Frustrated by perceived exploitation of the system, the U.S. has increasingly bypassed WTO rules. The Trump administration’s imposition of tariffs on Chinese goods in 2018 marked a significant departure from multilateral trade norms.
- These actions, often justified on national security grounds, have contributed to a broader trend of unilateralism, weakening the WTO’s authority.
What Does the GATT-ification of the WTO Mean?
The “GATT-ification” of the WTO refers to the gradual erosion of the organization’s legal framework, with countries reverting to the ad-hoc, diplomacy-driven approach of the GATT era. This regression is characterized by:
- A Dysfunctional Dispute Settlement System: The WTO’s Appellate Body has been non-operational since 2019 due to the U.S. blocking new appointments. This paralysis has rendered the first-tier dispute panels ineffective, as unresolved appeals effectively stall enforcement.
- U.S. Protectionism and the WTO’s Existential Crisis: Successive U.S. administrations have displayed bipartisan hostility toward the AB, reflecting a broader shift toward protectionism. The potential return of a Trump administration could exacerbate these challenges, further eroding the WTO’s relevance.
- National Autonomy Over Trade Policies: Countries are increasingly bypassing WTO rules to pursue their own trade interests. This trend undermines the rule-based multilateral order and highlights the resurgence of geopolitical considerations in trade policy.
- Recent Developments Supporting GATT-ification: The rise of bilateral and regional trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), suggests a preference for smaller, more manageable trading blocs.
- The limited progress in concluding multilateral trade negotiations, such as the Doha Round, underscores the WTO’s diminished role in global trade governance.
Possible Impacts of GATT-ification:
India’s View on GATT-ification:
- India has expressed concerns over the erosion of multilateralism, emphasizing the importance of a fair and inclusive global trading system.
- As a developing country, India relies on the WTO to ensure that its interests are protected in a rules-based order.
- The weakening of the organization raises apprehensions about the ability of smaller economies to safeguard their trade interests against larger powers.
- Fragmentation of Global Trade: The shift to bilateral and regional agreements could create a patchwork of trade rules, complicating international commerce.
- Weakened Dispute Resolution: Without a functioning dispute settlement system, trade disputes may escalate into conflicts, harming global economic stability.
- Erosion of Trust: The decline of the WTO’s authority undermines trust in multilateral institutions, potentially leading to protectionism and economic nationalism.
Way Forward to Address GATT-ification:
- Revitalising the Appellate Body: Member nations must work collectively to resolve the deadlock and restore the dispute settlement system.
- Strengthening Multilateral Negotiations: Reviving stalled negotiations and addressing systemic issues, such as state subsidies, are crucial.
- Enhancing Inclusivity: Ensuring that the WTO remains relevant to developing countries by addressing their concerns and needs.
- Promoting Dialogue: Building trust among member states through diplomacy and cooperation can help restore confidence in the WTO.
Conclusion:
The GATT-ification of the WTO marks a significant shift in global trade governance, challenging the principles of multilateralism and rule-based order. While the return to a diplomacy-driven approach may provide flexibility, it risks undermining the predictability and fairness that the WTO was designed to ensure. Addressing this crisis requires collective action, political will, and a renewed commitment to the ideals of multilateralism to ensure a stable and inclusive global trading system.
