Retaliation is only legal under a specific scenario. Most political leaders face massive competition from domestic interests groups to provide them protection against foreign competition.According to WTO rules, when a country finds its partner using unfair trading practices, it can bring the dispute to a WTO panel.Last, trade agreements recognise the role of politics.India has also been a beneficiary of this practice. President Donald Trump has also threatened tariffs on a range of Chinese goods worth $200 billion. In return, the US’ trading partners are planning to impose tit-for-tat retaliation tariffs on goods imported from the US. And in the absence of any enforcing power, there are no repercussions to countries ignoring WTO precedents. The global trading system is based on mutual gains and diplomatic goodwill. Most countries fear that an adverse ruling might affect their international credibility.
Srijan Shukla is a student of comparative politics and international relations at McGill University. It is also a recipient of GSP (Generalised System of Preferences) – according to which India gets preferential access to western markets, but is not expected to provide that reciprocal access to its western trading partners. It has a lot to gain by ensuring that the global trading regime remains intact in its current form. At best, it is an impartial referee in trade disputes between states.GATT (General Agreement on Tariffs and Trade) and now WTO are first and foremost purely diplomatic institutions. While they were not expected to open their markets reciprocally, they ended up joining GATT/WTO and became members of the global trading regime. As aforementioned, while the current US steel and aluminium tariffs are legal, the EU’s retaliation is not. Perhaps, it is time India starts acting like a major power and does more than just paying lip service to free trade. Even some of India’s inability to harness the gains from free trade is due to its own failings, such as the severe lack of labour mobility.Perhaps, it is time India starts acting like a major power and does more than just paying lip service to free tradeOver the years, the World Trade Organization (WTO) has emerged as the single greatest success story of international institutionalism.
Second, the cornerstone of WTO’s success has been its dispute resolution mechanism.GSP is a classic example of WTO’s negotiating strategy. WTO does not derive its power from some special kind of rights to execute or punish its various members. On 1 June, the US imposed tariffs on aluminium and steel imports from the EU, Mexico, and Canada. Trade agreements allow political leaders to tie their hands internationally, and guard themselves against domestic pressures. Since 1947, all trade negotiations have completely left out textiles and agriculture.Today India is Asia’s third largest economy, and only second to China in terms of future optimistic trends. We see instances of this over and over again, where successful trade negotiations ignored the politically sensitive areas and aimed to maximise liberalisation everywhere else. There are three specific diplomatic reasons that underpin WTO’s massive success.First, trade negotiations since the formation of GATT in 1947 have practiced a very clever tactic – never Woollen Knitting Wholesalers touch politically sensitive topics. It helped the western economies develop after war, led to the rise of Asia, and has helped pull millions out of poverty. Over the years, India has succeed in getting a lot of exemptions from WTO rules, such as restrictions over food subsidies.On his recent global outings, PM Narendra Modi has made it a point to pay lip service to the gains from free trade. It is this diplomatic basis that has made WTO enviably successful. Majority of disputes brought to WTO are resolved at the consultation stage and do not even make it to a ruling. The core rationale of WTO is reciprocity.While WTO’s diplomatic roots are responsible for its success, they have the potential to lead to its unravelling. This makes them negotiate a settlement diplomatically before it get to the ruling stage.Fascinatingly, this long process is the reason for its success.The American usage of the national security exception is nothing short of bizarre.
Free trade has helped India immensely over the years. In the past 70 years of trading history, this is only the sixth occasion when it has been used. These events have severely heightened the risk of a global trade war.ThePrint’s YouTube channel is now active and buzzing. This WTO exception is a tool of the last-resort and there has been a long held precedent of staying away from it. Interestingly, as pointed out by my McGill University’s Krzysztof Pelc, while the American tariffs are legal, possibly the retaliation by the EU and others is not.In an unprecedented move, the US justified its tariffs using the “national security exception” in WTO rules. In its previous avatar as GATT, and now WTO, it has helped uphold free trade for over seven decades now. It would take no time for this precedent-driven system to unravel if its members decide to do so. But the existence and the usage of the national security clause compel us to inspect the diplomatic roots of WTO and the global trade cooperation. As argued by Pelc here, trade agreements don’t ignore, but leverage politics. Textiles and agriculture, for example, are some of the most sensitive sectors for the vast majority of countries.But it has been a turbulent few months for global trade. Please subscribehere. A large number of developing states were given preferential access to developed world markets through GSP. Only when the panel rules against the unfair practice and there is no compliance from the side of the aggressor can the country retaliate by equivalent tariffs. But contrary to his rhetoric, his government has continued to put more protectionist policies in place
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