Is the World Trade Organization still relevant?

The Hindu

24-04-2025

United States President Donald Trump's 'reciprocal tariffs' have been compared to the Smoot-Hawley tariffs of the 1930s, which many say hastened the slide into the Great Depression. The difference between the 1930s and now is that we have the World Trade Organization (WTO) to oversee and enforce global trade rules. However, some argue that over the years, the WTO has gradually lost its compass and is in need of massive reforms. Is the WTO still relevant? Mark Linscott and Mohan Kumar discuss the question in a conversation moderated by Samreen Wani. Edited excerpts:
Has the WTO been sidelined? Will the U.S. pay heed to any advice from the WTO?
Mohan Kumar: The WTO, as we know it, is gone. It is irrelevant and has been sidelined. I don't want to say it is dead yet. The WTO was expected to perform three functions — the negotiating function, the dispute settlement function, and the trade monitoring function — and it is not performing any of them. The negotiating function has gone for a six since Doha [the Doha Round of talks in 2001]. There is only one multilateral agreement — the fisheries agreement — that has been concluded, and even that has not been fully concluded. The Appellate body or the dispute settlement mechanism (DSM) has also being rendered dysfunctional. It started during Barack Obama's time. Since then, the U.S. has blocked appointments to the Appellate body, the ultimate court of appeal. The WTO tries to do whatever it can under the trade monitoring function, but that is not being performed efficiently because there is a lot of opacity about trade measures from a number of members, particularly one big member. The fact that the Trump tariffs are happening at a time when the multilateral trading system has been rendered toothless and inefficient makes it much more serious.
Mark Linscott: I agree with Ambassador Kumar that the WTO has been sidelined. The decline of the WTO and its diminishing relevance goes back long before the first Trump administration to the launch of the Doha Round. I think that mandate was misplaced. It was perhaps too ambitious, too far reaching, and basically [had] mismatched expectations. We also had the accession of China. And I think there was a degree of naivete about how well WTO rules would function with respect to China's measures and its behaviour on trade. During the Doha Round, the mismatched expectations involved some of the grievances that are felt now by the Trump administration. There were efforts to negotiate on large disparities on tariffs and [there was] really no traction in those negotiations to lower tariffs multilaterally on a non-discriminatory basis.
The U.S. has for too long blocked appointments to the Appellate body, but there were grievances associated with the operations of the WTO's DSM and the Appellate body, and whether it was in fact engaging in 'legislating' as opposed to simply looking at facts.
If these tariffs do come into effect, can the WTO prevent an economic crisis?
Mark Linscott: No. The WTO is not in a position to stem any global economic decline. It is not a forum where most nations can come together, be honest with one another, and essentially find a solution out of that kind of crisis.
Mohan Kumar: The basic problem is that consensus or decision making by consensus is proving to be a problem. When this issue was discussed in the legal drafting group, two countries opposed voting — India and the U.S. So, if there are reforms to be made on the basis of decision making, we will have to get around the principle of 'consensus'. On the question of dispute settlement, the European Union put forward a proposal on arbitration which has not found universal favour. On trade monitoring, there is no way of forcing countries to somehow disclose the measures they have taken, to the WTO.
At this juncture, is there a complete erosion of the MFN (most-favoured-nation) principle?
Mohan Kumar: The bedrock of the multilateral trading system is Article 1, MFN. Free trade agreement (FTA) is an exception to Article 1 and has to be blessed by the WTO. If you conclude an FTA, you have to intimate the WTO. I concede that the WTO has not done a great job in minutely scrutinising the FTAs.
The tariffs indicate the U.S.'s final withdrawal from the WTO system. Second, they introduce tremendous uncertainty. And finally, they also introduce a certain degree of complexity because I don't know if the U.S. Trade Representative (USTR) has the resources to negotiate with 60 countries all at once. But India has got a first movers advantage [in negotiating a trade deal].
Mark Linscott: MFN goes back to 1947 with the creation of GATT [General Agreement on Tariffs and Trade]. And that is part of the problem, at least from the U.S.'s standpoint. What has fed the grievances of the Trump administration is the sense that the U.S., perhaps rashly and unilaterally, over many rounds of trade negotiations, lowered its simple average tariffs to a very low level compared to many other countries, including India. Then, when efforts were made to continue tariff liberalisation and expectations were high that other countries would follow suit and lower their tariffs, that didn't happen. The U.S. started stepping away boldly from MFN during the first Trump administration but it was continued by the Biden administration. Section 232 (tariffs on steel and aluminium) and Section 301 (tariffs against China) were maintained by the Biden administration. With Trump 2.0 we have got a much more radical set of circumstances. There is consensus among Democrats and Republicans that MFN has not worked well for the U.S. Countries started negotiating FTAs on an accelerated basis in the late 1990s and early 2000s. And many countries through FTAs were stepping away from MFN. They found it easier to negotiate on tariffs bilaterally than at the WTO.
It has been decades since any consensus was reached on fisheries subsidies, agricultural subsidies, and on public stock holding of grains. India has led the opposition to these agreements. Why is that the case?
Mohan Kumar: While the major players will have to bear the major responsibility of the collapse of the WTO because of just the sheer weight of trade clout that they possess, India also did its bit. We objected to some things that we should not have objected to.
India cannot do much when it comes to agriculture. This is a politically sensitive area for any government in India. The WTO was callous when it came to India's concerns on agriculture. While the U.S. and the EU were allowed to subsidise so much over the years, India, which relies on domestic production, was limited to a 10% subsidy. India finds itself in a situation where it does not want to negotiate labour standards and environmental protection at the WTO, but is okay to discuss this bilaterally with the EU, the U.K., and maybe even with the U.S. The only explanation I have heard is from a former commerce secretary who said that India wants a certain degree of comfort doing this bilaterally first.
Mark Linscott: The view in the U.S. is different from the Indian view as to what extent the developed world was ignoring the sensitivities and food security concerns of many developing countries, particularly India's. There are many other developing countries which don't necessarily share India's view. Negotiations collapsed on agriculture and domestic support. It is almost impossible to negotiate bilaterally on subsidies.
There has been a lot of criticism, particularly from the U.S., that the WTO has allowed China to flood the global markets with cheap exports, but simultaneously restricted access to its domestic markets. Would you agree with this assessment?
Mark Linscott: China is a remarkable challenge globally, economically, and on trade. When China joined the WTO, nobody anticipated how lacking the WTO rules would be in addressing the China challenge and how dominant China would become as an export juggernaut.
Mohan Kumar: When we framed the rules we had no idea of things which do not necessarily violate the WTO rules but which still undermine the integrity of the multilateral trading system. So, for example, there was never any question of looking at excess capacity and how one country, which can produce more than 50% of steel and cement, would suddenly flood the market and distort trade. And trade distorting measures are extremely important to the WTO. But we could not frame the rules for it because we simply did not foresee this.
Listen to the conversation in The Hindu Parley podcast