Trade Experts Say Making WTO’s Dispute Settlement System Operational Will Be A Tough Task

On the first day of the G20 Summit 2023 on September 9, G20 leaders expressed their willingness to conduct talks to reinstate a proper dispute settlement system in the WTO by next year.

WTO member countries are supportive of reforming the appellate body, but have different views on the specific reforms that are needed.

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The World Trade Organisation members will face a difficult task in making the WTO’s dispute settlement system fully functional by 2024, on account of the divergent approaches proposed by China, the European Union, and other such countries, experts said. 

Global Trade Research Initiative (GTRI)’s co-founder, Ajay Srivastava, said that the G20 members have decided to undertake WTO reforms, especially ‘aiming for a functional dispute settlement system accessible to all members by 2024’, reported PTI. The think tank’s co-founder noted that this will be a challenging task due to the different approaches suggested by the US, the EU, China, India, and others. 

Notably, the G20 leaders on the first day of the summit on September 9, expressed their willingness to conduct talks to build a proper dispute settlement system in the WTO by next year. The trade body’s dispute resolution system has been out of order due to a non-functional appellate body since December 2019.

In the declaration passed in the G20 Summit, the leaders stated, “We reiterate the need to pursue WTO reform to improve all its functions through an inclusive member-driven process, and remain committed to conducting discussions with a view to having a fully and well-functioning dispute settlement system accessible to all members by 2024.”

Trade experts feel this task will prove to be an especially challenging one for the trade body members. Hi-Tech Gears Chairman, Deep Kapuria, termed the G20 leaders’ commitment to undertake WTO reforms ‘a much-needed political boost’ to the WTO Secretariat, which has now begun preparations for the 13th Ministerial Conference. Kapuria said, “But what is more important is the leaders' call to make the WTO dispute settlement system functional and accessible to all members by 2024. Giving a deadline of 2024 would build pressure on WTO and its members to work out a system which is acceptable to all on a priority basis.”

The World Trade Organisation oversees and formulates regulations for global trade, and also supervises trade disputes between member states. A trade dispute, once filed with the WTO, can be settled in two ways, first, the countries come to a mutually agreed solution, and second, adjudication, which involves a panel ruling on the matter and if the decision is not satisfactory, the ruling can be challenged at the appellate body. The appellate body represents the highest court in the WTO. 

“WTO member countries are supportive of reforming the appellate body, but they have different views on the specific reforms that are needed. The US has blocked the appointment of new appellate body members since 2017, arguing that the body has become too politicized and has overstepped its authority,” Srivastava added explaining the complexities surrounding the trade body’s dysfunctional appellate body. 

The GTRI executive noted that the EU has urged for reducing the member count in the body and changing the appointment process for the members. While India, Srivastava noted, has stressed that the appellate body should remain an ‘independent and impartial body’. 

Currently, the body has seven members, and some nations have suggested the number should be reduced to five or three. Another expert stated that this move could help make the body more efficient and manageable. The appointment to the WTO appellate body is currently done through consensus of the trade body’s member nations. This process has made the appointment of new members very difficult and some countries have requested a more transparent and democratic process, the report stated. 

Srivastava stated, “The key challenge in WTO reforms is to find a solution that is acceptable to all member countries. This is a difficult task, but it is essential for WTO to remain relevant and effective in the 21st century.”

Notably, India gave a proposal to the trade body earlier this year in May, with suggestions for enhancing the functioning of multiple committees in the trade organisation.