The World Trade Organisation (WTO) is grappling with a dispute settlement crisis due to US opposition, indicating a shift towards a GATT-like diplomatic approach. The Appellate Body is inactive, affecting dispute resolution. The weakened system could compromise multilateral trade credibility and increase regional trade agreements.
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The World Trade Organisation (WTO) is experiencing a dispute settlement crisis as a result of US opposition, which highlights a shift away from rule-based trade systems and towards a GATT-like diplomatic approach.
It was founded on January 1, 1995, under the Marrakesh Agreement. It replaced the General Agreement on Tariffs and Trade (GATT).
It addresses trade in services and intellectual property. It functions as a binding institution with consensus-based decision-making.
It provides an international forum for the negotiation of multilateral and plurilateral trade agreements. It also has a dispute settlement system in place to resolve any conflicts that may arise as a result of these agreements.
The World Trade Organisation (WTO) is unable to revive its dispute settlement system, specifically the Appellate Body (AB), by the end of 2024.
The AB has been inactive for more than five years because the United States has prevented the appointment of new members. This obstruction started under President Barack Obama, developed during Donald Trump's presidency, and continues under President Joe Biden.
The blocking of the AB has hampered the WTO's ability to effectively resolve trade disputes.
The United States started preventing the appointment of Appellate Body members in response to its dissatisfaction with the WTO's inability to address specific trade issues, particularly those involving China.
The United States believed that China used the WTO system to its advantage without following the free-market principles.
The United States saw the WTO's rules as limiting its ability to counter China's economic rise and state-led policies. As a result, the United States sought to dismantle the WTO's dispute settlement mechanisms, including the Appellate Body to gain greater control over trade policy free of legal limitations.
The absence of a functioning dispute settlement system at the WTO compromises the credibility of multilateral trade.
Without the AB to review disputes, countries may slow or avoid complying with mandates by exercising their legal right to appeal to a non-operational body, which will create an environment of uncertainty in international trade regulations.
Countries may prefer unilateral actions, such as tariffs or trade wars, further fragmenting the global economy. The rise of regional trade agreements, which frequently exclude weaker nations, could increase inequalities, making smaller countries vulnerable to dominant powers.
It refers to a return to the informal, diplomacy-driven mechanisms of the General Agreement on Tariffs and Trade (GATT). This change represents a reversal of the WTO's founding principles, which stressed a binding legal framework for international trade.
As international politics, mostly tensions between the United States and China, take priority over legal mechanisms, countries reclaim sovereignty over trade policies, shifting away from the rule-based system established.
The increasing influence of regional trade agreements, combined with the US-China rivalry and the erosion of the WTO's legal authority indicates that the WTO's role in global trade is shrinking. To remain relevant, the WTO must address these challenges and adapt to a world in which political power shapes trade relations rather than legal rules.
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