At Age 20, WTO Is Facing A Serious Challenge To Its Legitimacy

Developing countries have for long said that the organisation is not sympathetic to their conditions and needs. Now, this disaffection has grown to threaten the very legitimacy of the WTO.  

Two decades since its establishment in 1995, the World Trade Organization (WTO) is facing an uncertain future. This institution, the first to be set up in the post-Cold War era, provided the institutional basis for the multilateral trading system which was put in place in the immediate aftermath of World War II. In 1947, 23 countries, including India, had signed the General Agreement on Tariffs and Trade (GATT) that ushered in a “rules based trading system”.

Although the popular perception has been that GATT, and now the WTO, singularly pursues the trade liberalisation agenda, the reality is that these institutions were entrusted with the responsibility of ensuring balanced development of the member countries of the organisation through trade. The Marrakesh Agreement establishing the WTO recognised that:

“trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services”.

Importantly, the Agreement insisted that there should be “optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment”. Furthermore, the WTO member countries were expected to make “efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development”.

These expectations of the architects of the WTO, namely to make trade relations serve the larger development needs of the developing and the least developed countries, have, however, been constantly challenged by the dominant economic powers. The latter have been virtually pursuing a mercantilist agenda wherein their main interest has been to secure an ever expanding space for large corporate interests. This agenda has been challenged by the developing countries on several occasions, the first of which resulted in the failure of the Seattle Ministerial Conference in 1999 to embark on a further process of trade liberalisation. Subsequently, the developing countries were able to work in unison to ensure that some of their critical concerns were taken on board in the Doha Ministerial Conference, which launched a new round of negotiations in 2002. Driving these negotiations was the so-called Doha Development Agenda, which gave particular focus to areas like agriculture and intellectual property rights.

The trade ministers of the WTO member countries agreed that the intellectual property laws “should not prevent Members from taking measures to protect public health”. This agreement among the ministers was important for the generic pharmaceutical companies in countries like India, which had emerged as a major source of affordable medicines for the developing world. These companies played a significant role in supplying cheap medicines to several countries facing public health emergencies resulting from the high incidence of HIV/AIDS, TB and malaria.

As regards agriculture, the trade ministers had agreed that the Agreement on Agriculture would be amended in order to help developing countries meet the objectives of food security, rural livelihoods and rural development. This was to be done in two ways. First, the predominantly small-farmer agriculture in developing countries would be allowed to maintain higher import tariffs on products crucial for meeting food security needs and rural livelihoods. Two, subsidies given to their producers by large agricultural producers like the United States and the European Union were to be reduced to prevent them from dumping cheap products in the international markets. But even after 13 years of negotiations, these expectations have remained unmet and, therefore, concerns regarding food security and livelihoods of small farmers persist.

The lack of sensitivity of the WTO to the food security concerns of its member states appeared prominently when India’s National Food Security Act was found to be violating the provisions of the Agreement on Agriculture. India’s arguments that the Agreement should be amended to enable a member state of the organisation to meet its sovereign right to feed its poor were opposed by the some of the more prominent members. Eventually, a temporary arrangement was worked out which would enable India to implement the food security programme while WTO consider ways of amending the Agreement on Agriculture.

An unfortunate fall-out of the process that India had to go through to secure its food security programme was the Agreement on Trade Facilitation. This is the first agreement that the WTO members had agreed to since the organisation had been established. India made its support for the Trade Facilitation agreement (which, as the name suggests, is to streamline the procedures for the conduct of trade) conditional upon the satisfactory resolution of its concerns. While the immediate problems that India faced have been addressed, as mentioned earlier, it has left a deep divide amongst the members of the organisation.

With most developing countries finding that their development aspirations are remaining unfulfilled in the WTO, their support for the trade liberalisation agenda of the larger economic powers has dwindled over time. This has become even more apparent since the conclusion of the Bali Ministerial Conference in 2013, a period that has seen a virtual impasse in the multilateral negotiating processes.

What is more worrying for the future of the WTO is not the stalemate in the multilateral processes, but the emergence of a number of plurilateral (more than two countries but not many enough to make it multi-lateral) negotiating forums. These forums, which include most advanced countries, are deliberating on ways of opening up markets in information technology products, environmental goods and services between what can be called as the “club of the willing”. There is, therefore, a distinct possibility that a small group of WTO members would develop a parallel track for opening markets and setting rules, without involving an overwhelming majority of the members of the organisation. Such a development would pose a serious challenge to the legitimacy of the WTO.