| PYQ Relevance: Mains: Q) What are the key areas of reform if the WTO has to survive in the present context of the ‘Trade War’, especially keeping in mind the interest of India? (UPSC CSE 2018) Q) “The broader aims and objectives of WTO are to manage and promote international trade in the era of globalization. But the Doha round of negotiations seems doomed due to differences between the developed and the developing countries.” Discuss from the Indian perspective. (UPSC CSE 2016) Prelims: Q) India enacted The Geographical Indications of Goods (Registration and Protection) Act, 1999 to comply with the obligations to (UPSC CSE 2018) (a) ILO (b) IMF (c) UNCTAD (d) WTO |
Note4Students:
Prelims: International Organisations;
Mains: International Organisations; Trades and Practices;
Mentor comments: WTO members concluded the 13th Ministerial Conference (MC13) in Abu Dhabi on 2 March with the adoption of a Ministerial Declaration setting out a forward-looking, reform agenda for the organization. Over the last decades, many countries have adopted policies aimed at facilitating investment to attract, retain, and expand foreign investment flows. We need to analyze this news thoroughly as MC13 represented a historic opportunity for the first time by addressing the issue of Trade Cooperation for the environment and the associated challenges in industrial policy.
Let’s learn.
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Why in the News?
India must reconsider its defensive approach towards Plurilateral Agreements (PA) such as the Investment Facilitation for Development agreement.
Background:
- Ministers at the meeting of WTO took several ministerial decisions, including renewing the commitment to have a fully and well-functioning Dispute Settlement System by 2024 and to improve the use of the Special and Differential Treatment (S&DT) provisions for developing and Least Developed Countries (LDCs).
- India has strongly opposed a China-led proposal for an investment facilitation pact besides pressing for finding a permanent solution to public stock holding of grains for food security and protection of the interests of fishermen at the upcoming WTO ministerial meeting.
Key Takeaways about Plurilateral Agreement (PA) from MC13:
- It is critical to recall that while the WTO is a multilateral trade organization.
- Article II of the WTO Agreement categorically allows for Pas which binds the WTO member countries that accept them and do not create rights or impose obligations on the remaining members.
- Despite opposition from countries such as India, negotiations for an IFD agreement at the WTO were launched in 2017 on a plurilateral basis by 70 countries. This was done through a process known as the Joint Statement Initiative.
- Further, 120 countries wanted to include the IFD Agreement as a Plurilateral Agreement (PA) within Annex 4 of the WTO Agreement.
| What is the Agreement on Investment Facilitation for Development (IFD)? In the WTO context, the concept of investment facilitation means the setting up of a more transparent, efficient, and investment-friendly business climate, by making it easier for investors to invest, and conduct their day-to-day business. It also expands their existing investments (whole-investment-lifecycle approach), as well as for host and home governments to work cooperatively and in mutually beneficial ways to facilitate not only more but also more sustainable investment. |
What are the present concerns of the Indian government regarding the Plurilateral Agreement (PA)?
- Principle Concerns: India does not seem to be exceedingly concerned about the text of the IFD agreement. India’s principal concerns are two-fold.
- The question of whether investment can be part of the WTO.
- The process followed to make the IFD agreement a part of the WTO rulebook.
- Challenge of Legal Mandate and Mutual Consensus: The IFD Agreement will require states to augment regulatory transparency, and streamline administrative procedures to bolster foreign investment inflows.
- Since all countries never agreed to launch negotiations on an IFD Agreement, according to India, IFD negotiations and the subsequent text that came up for adoption are illegal. (According to the Article X.9 of the WTO Agreement)
- On Dispute Resolution: The IFD does not contain provisions on market access, investment protection, and Investor-State Dispute Settlement (ISDS).
- Given the existing structure of the WTO’s dispute settlement mechanism, where only states can bring legal claims against other states, it is implausible that ISDS can be a part of it.
Current Dilemma between ‘Investment’ and ‘Trade’:
- The current dilemma is whether the investment is part of the WTO or not because investment per se is not trade. However, the recent scenario talks on contrast such as follows:
- According to the Organisation for Economic Co-operation and Development (OECD), about 70% of international trade occurs through global value chains, which are characterized by trade and investment, thus proving the close relationship between the two.
- Therefore, several modern-day free trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership include detailed investment provisions covering both facilitation and protection.
- India’s newly minted trade agreement with the European Free Trade Association also contains provisions on investment, though it is restricted to facilitation and promotion measures.
Conclusion: The PAs such as the IFD agreement are essential for reinvigorating the WTO’s stalemated legislative function. India, which will soon be the third biggest economy, should reconsider its defensive approach towards PAs, as in the proposed IFD Agreement in the WTO.
