Editorials/Opinions Analyses For UPSC 8 October 2021

Contents

1. Trade multilateralism at risk
2. Seeding a data revolution in Indian agriculture

Trade multilateralism at risk

Context:

The World Trade Organization (WTO) — the global trade body — is facing a serious existential crisis as the United States, which played a pivotal role in establishing the WTO, seems to have lost interest in it.

Relevance:

GS-III: Indian Economy (Important International Institutions, Protectionism, Government Policies & Interventions)

Dimensions of the Article:

1. World Trade Organization (WTO)
2. Functions of WTO
3. Structure of WTO
4. The Importance of the WTO to World Trade
5. What is the World Trade Organization’s Appellate Body?
6. Ongoing issue with WTO’s Appellate Body
7. Major Issues with the WTO (Apart from Appellate Body discussed above)
8. Other Issues related to WTO

World Trade Organization (WTO)

• The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations.
• It is the largest international economic organization in the world.
• The headquarters of the World Trade Organization is in Geneva, Switzerland.
• 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.
• The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
• Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.
• The WTO has 164 members (including European Union) and 23 observer governments (like Iran, Iraq, Bhutan, Libya etc.)
• India is a founder member of the 1947 GATT and its successor, the WTO.

Origin of WTO

• The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947.
• The Uruguay Round (1986-94) of the GATT led to the WTO’s creation. WTO began operations on 1st January, 1995.
• The Agreement Establishing the WTO, commonly known as the “Marrakesh Agreement”, was signed in Marrakesh, Morocco in 1994.

Functions of WTO

• Trade negotiations: The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They set procedures for settling disputes.
• Implementation and monitoring: WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented.
• Dispute settlement: The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly.
• Building trade capacity: WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards.
• Outreach: The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

Structure of WTO

• Structure of the WTO is dominated by its highest authority, the Ministerial Conference, composed of representatives of all WTO members, which is required to meet at least every two years and which can take decisions on all matters under any of the multilateral trade agreements.
• The General Council is composed of all WTO members and is required to report to the Ministerial Conference.
• The General Council convenes in two particular forms:
  1. Dispute Settlement Body: To oversee the dispute settlement procedures.
  2. Trade Policy Review Body: To conduct regular reviews of the trade policies of individual WTO members.

The Importance of the WTO to World Trade

• The WTO is at the forefront of efforts to ensure unimpeded global free trade and reduce trade barriers, operating on a rules-based multilateral system.
• It has made important contributions to the progress made around the world towards promoting global trade. This has led to the growth of a number of economies, the emergence of new markets – all important factors not only in improving business, but also in lifting people out of poverty.
• It does this by implementing, regulating and operating trade agreements between countries, and provides a fair forum for trade negotiations between member countries, mediating on disputes as they arise. It aims to help with imports, exports and conducting trade fairly.
• The WTO also cooperates with the IMF (International Monitory Fund) and World Bank to ensure global economic policies are fair and cohesive. Therefore, it isn’t a matter of the WTO being important for international business, but of it being absolutely fundamental.
• Different countries operate on different regulations and rules between different countries, and it’s not easy for an international business to stay on top of these when it operates in multiple countries. But the job would be a lot more difficult if these rules were unfair or unreliable, or not consistently applied.
• The importance of a regulatory body such as the WTO is especially pressing at a time of such pronounced global uncertainty – several of its members are currently using it to dispute President Trump’s Trade tariffs, while a no-deal Brexit scenario would likely see the UK revert to WTO rule.

What is the World Trade Organization’s Appellate Body?

• For proper enforcement of trade rules, a binding, two-stage dispute settlement system was established at the World Trade Organization in the 1990s.
• The Appellate Body is the scaffolding of the dispute settlement system, with seven standing members.
  • In the first stage for adjudicating trade disputes, a panel would decide cases brought before it by the members. Rulings issued by the panels can be appealed at the Appellate Body.
  • As part of the second-stage of adjudication, the Appellate Body can uphold, modify or reverse the legal findings and conclusions of a panel.
• Therefore, the Appellate Body’s decisions are final and adopted within 30 days by the dispute settlement body.
• Sanctions can be imposed on a member in case of its failure to comply with the Appellate Body’s rulings.
• Cases involving trade remedies such as countervailing and anti-dumping measures, and the use of a controversial practice called the zeroing methodology that initiated the anti-dumping duties, dominated the disputes among the WTO members.
• The establishment of the Appellate Body has given teeth and credibility to the rules-based multilateral trading system. Moreover, it provided security and predictability in the multilateral trading system.

Ongoing issue with WTO’s Appellate Body

• In December 2019, the U.S. chose to spike the Appellate Body by starving funds for its functioning.
• It also stalled the selection process for filling six vacancies at the Appellate Body.
• Consequently, the Appellate Body is left with only one member, who will not be able to deliver any rulings on pending trade disputes — a minimum of three  members is required to adjudicate any dispute.
• United States’ blocking of new appointments to the WTO’s Appellate Body (AB) has paralyzed the entire mechanism for resolving trade disputes between countries.
• The U.S. also vetoes proposals to find solutions to this impasse, including stalling the proposal of the European Union to establish an alternative interim appellate arbitration mechanism.
• Pending appeals to the Appellate Body has subsequently increased to around 20 cases, giving an option to countries who don’t want to comply with the WTO panel decisions to appeal against the decision making the ultimate process a mockery.
• The strangulation of the Appellate Body is a reflection of unilateralism and protectionism that are on a sharp rise. The absence of the Appellate Body will create a jungle raj and paves the way for a steep descent into the General Agreement on Tariffs and Trade, 1947 rules.

Why is the U.S. blocking the filling of vacancies in the Appellate body?

• Washington has repeatedly accused the Appellate Body of allegedly straying away from the dispute settlement understanding (DSU) in several disputes involving the U.S.’ measures that were challenged by other members.
• It has maintained that the Appellate Body failed to issue rulings within the 90-day deadline.
• The U.S. says the Appellate Body’s rulings failed to adhere to the provisions in the dispute settlement understanding in cases involving countervailing (anti-subsidy) and anti-dumping measures based on the zeroing methodology.

Major Issues with the WTO (Apart from Appellate Body discussed above)

Seeing MSP as trade-distorting

• The WTO rules allow countries to procure, stock and distribute food. However, if such procurement is done at an administered price such as the MSP that is higher than the external reference price, then the budgetary support provided shall be considered trade-distorting and is subject to an overall cap.
• India offers its farmers Minimum Support Price (MSP) and hence with rising prices and the need to do higher procurement to support farmers and provide food to the poor at subsidised prices, India might breach the cap.
• Although countries have agreed that legal suits will not be brought if countries breach the cap, it is imperative to find a permanent solution such as not counting MSP-provided budgetary support as trade-distorting.

TRIPS waiver on COVID-19 related medical products

• India and South Africa had proposed a TRIPS waiver to overcome intellectual property (IP)-related obstacles in increasing accessibility of COVID-19 medical products, including vaccines.
• The WTO member countries continue to disagree on the need of waiving the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement for COVID-19 related medical products.

Regulating irrational subsidies for Fishing

• The WTO is close to signing a deal on regulating irrational subsidies provided for fishing that has led to the overexploitation of marine resources by countries like China, which is the largest catcher and exporter of fish. However, this agreement should strike a balance between conserving ocean resources and the livelihood concerns of millions of marginal fishermen.
• Fishing subsidies directly contribute to overfishing and these subsidies effectively mean that taxpayers are paying industrial boats to degrade the environment and to destroy the food security and livelihood of vulnerable coastal communities.
• An effective special and differential treatment provision that accords adequate policy space is what India and other developing countries should insist on.

Mega plurilateral trade agreements emerging

• 2 Examples showing the emergence of mega plurilateral trade agreements as a result of concerns about WTO are: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) — a treaty between 11 countries and Regional Comprehensive Economic Partnership (RCEP) agreement between Asian economies and countries down under.
• These agreements have a divided approach which not only fragments the global governance on international trade but also pushes the multilateral order to the margin, converting the WTO to what some call an “institutional zombie”.

Other Issues related to WTO

• Changing world order: The unipolar world under US was represented through institutions like WTO. Trade during this phase became rule based in nature which favoured the west. But the world order is now witnessing structural changes with rise of developing countries and their increasing share in world trade.
• Process Loopholes: The negotiation process prime facie seems democratic but Ministerial Conferences are accused of being opaque and overly technical. Moreover, consensus-based rule making has become a root cause in stagnation in reforms.
• Dispute Resolution: The dispute resolution mechanism is costly and lengthy. It is majorly resorted to by developed countries and developing countries are victims to the mechanism. There is politicization of the Appellate Body appointment and reappointment process.
• Increasing usage of Non-tariff Barriers: According to recently published “The Asia-Pacific Trade and Investment Report 2019”, non-tariff measures (NTMs) have increased in the past two decades.
• Nature of agreements: Agreements signed under WTO are alleged to be discriminatory and exclusionary in functioning. DDA (Doha Development Agenda) has still not been able to provide permanent solution to subsidies under domestic support. WTO do not have any agreement to deal with digital enabled trade i.e. e-commerce.
• Allegations are levelled by developed countries against developing of flouting TRIPS. They oppose generic medicines, compulsory license and import substitution. On the other hand, developing countries cite public health concerns and level allegations of ever-greening against pharmaceutical companies.

-Source: The Hindu

Seeding a data revolution in Indian agriculture

Context:

• In 2021, two significant documents relating to the Indian agriculture sector were released.
  1. The first is a consultation paper on the India Digital Ecosystem of Agriculture (IDEA) from the Ministry of Agriculture and Farmers’ Welfare (MoA&FW) and
  2. The Second on Indian Agriculture: Ripe for Disruption from a private organisation, Bain and Company.

Through their work, these reports have depicted the agriculture reforms announced by the union government as a game-changer in the agriculture sector.

Relevance:

GS-III: Agriculture (Use of Technology to aid farmers and agriculture), GS-III: Science and Technology (Use of Developments in Science and Technology)

Dimensions of the Article:

1. Bain and Company report
2. The IDEA of integration based on the IDEA consultation paper
3. Issues with the Bain report and IDEA consultation paper
4. Challenges that need to be answered
5. Recently in news: About India’s National Farmers Database in creation

Bain and Company report

• The Bain report is a data-based prediction on agri-business scenarios, anchored to the agricultural set-up at present and predicting its future trajectories in another 20 years.
• It includes targeting the production of alternative proteins, and food cell-based food/ingredients and initiating ocean farming, etc.
• The report has a ‘today forward– future back approach’ and predicts a drastic investment opportunity development by 2025.
• The agriculture sector (currently worth $370 billion), is estimated to receive an additional $35 billion investment.
• The two enabling conditions for such investment opportunities are:
  • Changes in the regulatory framework, especially recent changes in the Farm Acts and
  • Digital disruption

The IDEA of integration based on the IDEA consultation paper

1. Digital disruption: The blueprint of “digital agriculture” is similar to the digital disruption mentioned in the Bain report.
2. Integration: Eventually, the farmer and the improvement of farmers’ livelihood is the aim of the IDEA concept and it is proposed to happen through tight integration of agri-tech innovation and the agriculture industry.
3. Enabling conditions: To be precise, the IDEA concept profounds the creation of second enabling conditions (which is described in the Bain report).
4. Openness of data: The IDEA principles explicitly talk about openness of data, which means open to businesses and farmers, indicating the kind of integration it aims at.
5. Value-added innovative services: by agri-tech industries and start-ups are an integral part of the IDEA architecture.
6. Data architecture: The services listed in the document (to be available on the platform) are equally important data for farmers and businesses.

Issues with the Bain report and IDEA consultation paper

• The Bain report has not been widely discussed — at least in the public domain.
• The assumptions used by authors especially for its ‘future back approach’, need more or less focusing on widespread food production in controlled environments.
• The emission, energy, and other resource footprints and sustainability issues around these techniques are not adequately studied.
• The IT industry has opposition to IDEA mainly due to the ethics of creating a Unique Farmer ID based on one’s Aadhaar number and also the potential for data misuse.
• Beyond the news coverage about the prospects of achieving the goal of Doubling Farmers Income on which the present government has almost lost its hope.

Challenges that need to be answered

1. The fact is that a majority of small and marginal farmers are not technology-savvy.
2. That most of them are under-educated for capacity building is ignored amidst these ambitious developments.
3. The Bain report relies on the general assumption that more investments into the agriculture sector will benefit farmers; ‘but how’ has not been convincingly answered.
4. Similarly, how the technology fix will help resolve all the issues of Indian agriculture listed at the beginning of the report is unclear in the IDEA concept.
5. These reports ignore the protest of farmers against the reforms without considering it as a barrier or risk factor resulting in a repealing of these new farm laws.

Recently in news: About India’s National Farmers Database in creation

• A data policy is being prepared specifically for the agriculture sector in collaboration with the Ministry of Electronics and Information Technology (MeitY) to create a digital ecosystem for the agricultural sector in India.
• The Central government had proposed an Agristack initiative to create a digital database that focuses on farmers and the agricultural sector.
• As part of the first step of this initiative, the government has initiated a farmers database that would serve as the core of the Agristack.
• The Agriculture Minister has stated that the proposed National Farmers Database would be linked to the digital land record management system and would thus initially only include farmers who were legal owners of agricultural land.

Significance of the farmers’ database

• The availability of a database would serve an important role in the formulation of evidence-based policies for the agricultural sector.
• Also, the government can make use of the database for targeted service delivery with higher efficiency and in a focussed and time-bound manner.
• The database could be used to select beneficiaries of government schemes.
• The availability of data will make it possible to implement digital technologies like Artificial Intelligence/Machine Learning, Internet of Things in the agricultural domain, thus opening up the sector to immense opportunities for improvement in productivity.

-Source: The Hindu