- The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations.
- The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948.
- It is the largest international economic organization in the world.
- The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments ratified by their parliaments.
- All decisions are taken through consensus and any member can exercise a veto.
- The primary purpose of the WTO is to open trade for the benefit of all.
- The WTO is essentially an alternative dispute or mediation entity that upholds the international rules of trade among nations. The organization provides a platform that allows member governments to negotiate and resolve trade issues with other members.
- The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
- At present, the WTO has over 160 members representing 98 per cent of world trade.
- India has been a WTO member since 1 January 1995 and a member of GATT since 8 July 1948.
- The topmost decision-making body of the WTO is the Ministerial Conference, which usually meets every two years.
- It brings together all members of the WTO, all of which are countries or customs unions.
- The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements.
- The General Council comprises the representatives of all member countries and acts as the representative of the Ministerial Conference when it comes to daily operations. Its job is to carry out the implementation and monitoring function of the WTO.
Dispute Settlement Body
- The Dispute Settlement Body (DSB) is a part of the General Council and is responsible for settling trade disputes between member states.
- According to the procedure established by the WTO, the first step to resolve a trade dispute is engaging in the consultation process.
- If two trading partners having a dispute could not resolve at that level, one of them can ask for a settlement of DSB for hearing. The General Council of the WTO convenes as the DSB.
- The DSB’s ruling can be challenged at the appellate body, the highest court for global trade disputes.
- The Appellate Body is a standing committee of seven members that presides over appeals against judgments passed in trade-related disputes brought by WTO members.
- Members of the Appellate Body have four-year terms. In the selection process, WTO members follow the consensus principle, which means that the nomination of the Appellate Body members can only proceed smoothly with the agreement of all the members of WTO.
- The Appellate Body must have at least three sitting members to hear an appeal.
Why in News?
- With the World Trade Organisation’s (WTO) ministerial conference just four months away, India has pressed for early start of formal talks on getting the dispute settlement system at the world body functioning again.
- The dispute settlement system at the WTO has been in limbo since the US in 2017 started blocking appointments to the appellate body of the dispute settlement system as the judges there retired.
- By 2019 the system became non-functional. Since 2020 all seven seats of the appellate body have been vacant.
- This has resulted in a situation where rulings by the dispute settlement body of the WTO cannot be implemented as the system of appeal is not available.
- Normally more than 70% of the rulings by dispute settlement body end up in appeal. Since December 2019, over 20 appeals have been filed for appeal.