Mains Marathon

Approach:

• Briefly introduce the role of the WTO and current challenges.
• In the body, evaluate the WTO's legitimacy crisis, the rise of FTAs, and how these impact India’s trade interests and multilateral commitments.
• Conclude with a way forward balancing India’s strategic interests.

Introduction:

The World Trade Organization (WTO), once the cornerstone of multilateral trade governance, is now facing a crisis of legitimacy due to escalating protectionism, unilateral actions, and the growing shift towards Free Trade Agreements (FTAs). For a country like India, deeply invested in multilateralism but also navigating regional trade complexities, this shift presents both challenges and strategic choices.

Body:

WTO’s Declining Influence and Growing Protectionism:

• Major economies like the US and China are increasingly resorting to unilateral tariffs, disrupting the global rules-based order.
  • Example: In 2018, the United States Trade Representative (USTR) imposed tariffs on Chinese goods citing national security concerns.
• The WTO’s dispute settlement mechanism (DSM), once effective, is now crippled, especially after the Appellate Body was rendered dysfunctional due to US objections.
• WTO officials have warned of trade fragmentation, possibly reducing global income.
• As WTO effectiveness declines, countries are increasingly turning to FTAs and Regional Trade Agreements (RTAs) to pursue trade goals.
  • As of 2024, over 350 FTAs were in force, including major ones like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
• WTO’s inability to effectively regulate non-tariff barriers, industrial subsidies, and digital trade erodes its relevance in modern trade policy discourse.

Implications for India’s Trade Interests:

• India has historically relied on WTO’s rules-based system to challenge protectionist policies by developed nations and ensure fair treatment for developing countries.
  • For example, recently India has updated its proposal to impose retaliatory duties under WTO norms in response to the USA’s increased tariffs on steel and aluminium imports from India.
• However, the WTO’s weakened enforcement mechanism limits India’s ability to address unilateral trade actions, such as those seen during the US-India tariff disputes.
• The growing dominance of FTAs poses risks, as India is not part of major regional blocs like RCEP and often faces tariff disadvantages in third-country markets.
• India’s withdrawal from RCEP was guided by concerns of trade imbalances with China, but it has since engaged in bilateral FTAs with the UAE, Australia, and the UK (under negotiation).
• While FTAs offer market access, they often demand higher standards on digital trade, IP, and investment protection, which may not align with India’s domestic priorities.
• WTO reforms, such as the Trade Facilitation Agreement (TFA), have benefitted India by easing customs procedures and reducing transaction costs for exporters.
• India continues to advocate for Special and Differential Treatment (S&DT) for developing countries, resisting attempts to dilute flexibilities granted under the WTO framework.

Conclusion:

India must pragmatically balance its commitment to WTO-led multilateralism with strategic engagement in FTAs, ensuring domestic industry protection, export growth, and global influence, while actively supporting WTO reforms to restore trust, strengthen dispute resolution, and address emerging trade challenges.