The global trading regime takes another knock
The collapse of WTO’s appellate tribunal is a reflection of the larger crisis in tradeUpdated: Dec 10, 2019 18:28 IST
The last word in global trade disputes has fallen silent. This week, the World Trade Organization (WTO)’s appellate tribunal has formally ceased to function because of a lack of judges. The United States, reflecting President Donald Trump’s mistaken belief that the global trading system is biased against his country, has been deliberately blocking the appointment of new judges.
Global trade wars will not follow immediately. As studies show, 98% of the non-tariff barriers notified to the WTO are uncontested and, of the remainder, nine of 10 are resolved by committee discussions. Less than one-half of 1% make it to the tribunal level. Even those cases are often settled out of court. But the most intractable trade disputes made it to the tribunals. They helped provide cover for politically messy situations and, by their simple existence, encouraged governments to settle differences. When major trade problems erupt, there will now be a strong incentive for an aggressive government to impose trade sanctions. That the country most likely to do so is the US makes all this particularly dangerous.
The global trade regime has also been under pressure, thanks to rising protectionism, shifts in technology and systemic violations of free trade norms by countries like China. While the US and China have contributed most to the delegitimitising of institutions like the WTO, India’s record has been mixed too, especially with the re-emergence of a certain protectionist mindset. About a fifth of India’s past growth booms were driven by exports. New Delhi must recognise the importance of trade and invest in trade’s enabling system.