India Seeks WTO Arbitration Against Australia

Context:

India has sought arbitration proceedings under the World Trade Organization (WTO) rules against Australia to resolve an issue concerning the services sector, as it could impact India’s trade in services.

Relevance:

GS III: International Relations

Dimensions of the Article:

1. Concerns Raised by India Against Australia
2. WTO Dispute Settlement Process Overview
3. The Appellate Body

Concerns Raised by India Against Australia

Joint Statement Initiatives (JSIs):

• In February 2024, over 70 WTO countries met in Abu Dhabi and agreed to adopt additional obligations under Joint Statement Initiatives (JSIs) as part of the General Agreement on Trade in Services (GATS). This aims to facilitate non-goods trade among themselves while offering similar concessions to other WTO members.
• The GATS agreement, effective since 1995, includes India as a long-standing member.
• These new obligations are designed to reduce unintended trade barriers related to licensing, qualification requirements, and technical standards.
• Indian professional companies are expected to benefit from equal access to markets in these 70 countries, provided they meet the required standards.
• This initiative is projected to reduce services trade costs by 10% for lower-middle-income economies and by 14% for upper-middle-income economies, resulting in total savings of USD 127 billion.

Opposition to Joint Statement Initiatives (JSIs):

• The Abu Dhabi agreement is a plurilateral deal, involving only 72 out of 164 WTO members.
• India, South Africa, and several other WTO members have not agreed to this deal. India, along with other developing nations, opposes various JSIs as they are not negotiated by all WTO members.
• Experts caution that integrating JSIs into the WTO could weaken the organization and lead to the adoption of many more such initiatives in areas like investments, MSMEs, gender issues, and e-commerce.
• Australia’s commitment to its obligations under a JSI is a significant issue in the dispute.

The Australia Case:

• In 2023, Australia informed the WTO of its intention to modify its specific commitments under the GATS to include additional regulations related to services.
• India, as an “affected member,” has expressed that Australia’s proposed modifications do not meet certain conditions.
• Despite negotiations between India and Australia, no agreement was reached.

WTO Dispute Settlement Process Overview:

Initiation of Disputes:

• Disputes commence with a mandatory dialogue between the complaining and defending parties, aimed at resolving issues amicably.
• These discussions are time-bound, with the goal of achieving a mutually satisfactory resolution.

Formation of Dispute Panels:

• Should discussions fail, the complainant may escalate the issue by requesting the formation of a dispute settlement panel overseen by the Dispute Settlement Body (DSB).
• The DSB, functioning under the General Council, is empowered to:
  • Establish panels,
  • Direct disputes to arbitration,
  • Formalize panel and arbitration outcomes,
  • Ensure compliance with recommendations,
  • Enforce suspensions of concessions for non-compliance.

Panel Process:

• Panels, comprising neutral experts in trade law, assess the dispute, evaluate both sides’ arguments, and generate a detailed report.
• This report, outlining facts, legal interpretations, and suggested resolutions, is shared with all WTO members for feedback.
• Unless unanimously rejected within 60 days, the report is ratified as the DSB’s decision.

The Appellate Body:

Establishment and Function:

• Formed in 1995 under DSU Article 17, this permanent body comprises seven members with four-year terms, based in Geneva.
• It reviews, amends, or overturns panel findings as needed.
• Its decisions, once ratified by the DSB, are binding on all dispute parties.

Implementation and Enforcement:

Compliance:

• Members found in violation are expected to align their practices with WTO standards.
• Failure to comply allows the aggrieved party to request punitive actions like suspension of concessions.

Challenges with the Dispute Mechanism:

Operational Hurdles:

• The U.S. has consistently obstructed the appointment of new members to the Appellate Body, significantly hampering its functionality.
• In response, developing nations advocate for a revival of the mechanism to its full capacity to ensure effective checks and balances.
• Options for these countries include participating in the EU-led Interim Appeal Arbitration Arrangement (MPIA), adopting a compromised appellate framework, or reinstating the original appellate structure with a selective opt-out feature.

-Source: Economic Times