Biden could revive but not reset WTO

On the first day of the Biden administration, the US rejoined the World Health Organization and Paris Climate Accord, thus affirming its commitment to multilateralism. In due course, this administration may resuscitate the World Trade Organization (WTO) by allowing the appointment of its new chief and requisite number of judges in the appellate forum of its dispute resolution body (DSB).

However, it may be a long time before the question of strengthening the multilateral rules-based trading system at the WTO comes up.

The WTO was established in 1995 following eight years of arduous Uruguay Round negotiations between members of the erstwhile GATT that culminated in the Marrakesh Agree­ment in 1994. It did help easier cross-border flow of goods and services and reduction of trade distorting measures. 

However, its decision making process did not help make much progress with the Doha Development Round launched in 2001. Besides, the inequitable distribution of benefits of globalisation and allegations that China is gaining by circumventing the rules gave rise to serious misgivings on the role of the WTO.

Calls for reforming the WTO grew louder even before Donald Trump took centre-stage in the US.

With his ‘America First’ policy, Trump weakened the multilateral rules-based trading system by unilaterally imposing tariffs on various goods on national security grounds, thus inviting retaliations and triggering a trade war. Trump walked out of the Trans Pacific Partnership (TPP) trade talks that his predecessor Barack Obama had hoped will help the US gain influence and counter China.

Trump was also aggrieved that some of the rulings at the DSB of WTO went against the US and accused the DSB of over-reach. He retaliated by refusing to appoint adequate referees to the appellate forum of DSB.

He also refused to endorse the near unanimous choice by other WTO members of Okonjo-Iweala, an American citizen of Nigerian origin, as director-general of WTO.

India benefitted by a dysfunctional appellate forum of DSB that could not hear its appeal against a WTO panel ruling that held many of its export promotion schemes as not compliant with the disciplines of WTO agreements. One of the targeted schemes, Merchandise Export from India Scheme (MEIS), has already been phased out and other disputed schemes may also go through some changes by March-end.

Under Trump, the US has lost much of its clout. Three weeks ago, the European Union signed an investment treaty with China. 

A day before inauguration of the Biden administration, the EU framed new rules to strike back against unilateral imposition of tariffs by the US. China has emerged as a major player in global trade as well as Regional Comprehensive Economic Partnership (RCEP) agreement between 15 countries in the Asia-Pacific.

Biden’s track record is that of encouraging freer trade and globalisation, taking the allies along and negotiating with the adversaries rather than taking a confrontationist approach or unilateral actions. He was part of the Obama administration that participated in the TPP trade talks. However, given the present divisions and anti-China sentiments in the US, he may not be able to backtrack on the trade and tariff policies that Trump adopted anytime soon. However, Biden can certainly go along with other WTO members to endorse the appointment of Okonjo-Iweala as the chief of WTO and help fill vacancies at the appellate forum of DSB.

email: tncrajagopalan@gmail.com