In the cases brought by China, Norway, Switzerland and Turkey, a dispute panel of the World Trade Organisation (WTO) has ruled that the US decision to impose customs duties on certain steel and aluminium products is inconsistent with the global trade norms.

 

Background

  • In 2018, the US imposed 25% and 10% import duties on certain steel and aluminium products, respectively, on the grounds of national security.
  • In retaliation, India had increased customs duty on a number of American products such as almonds, walnut, iron and steel items.
  • Bilateral consultation is the first step to resolve a dispute and if both sides are not able to resolve the matter through consultation, either can approach the establishment of a dispute settlement panel.
  • However, according to the sources, India is inclined to resolve the dispute with the US amicably and on mutually agreed terms.

 

WTO ruling

  • It does not find evidence that the measures were taken in time of war or other emergency in international relations.
  • The US needs to bring its WTO-inconsistent measures into conformity with its obligations under the GATT 1994.
  • However, the US has rejected the ruling, saying that there is an urgent need to fundamentally reform the WTO dispute settlement system.

 

Significance of the ruling for India

  • India had earlier stated that the US move has impacted exports of these products by Indian businesses.
  • As the country in 2018 too had approached the Geneva-based WTO against the US move, this ruling will help strengthen the Indian case too.

 

About World Trade Organisation

  • World Trade Organization was established in 1995 under the Marrakesh Agreement (signed by 123 nations in April 1994). It replaced General Agreement on Trade and Tariffs (GATT) which was in place since 1946.
  • India has been a member of GATT since 1948; hence it was party to Uruguay Round and a founding member of WTO.
  • While WTO came in to existence in 1995, GATT didn’t cease to exist. It continues as WTO’s umbrella treaty for trade in goods.
  • Afghanistan is the newest member, joining effective 29th July 2016. Russia was one of the only two large economies outside of the WTO after Saudi Arabia joined in 2005. It had begun negotiating to join the WTO’s predecessor in 1993.

 

Structure of WTO

The WTO is headed by the Ministerial Conference, while the daily operations are carried out by three administrative bodies –

  • The General Council comprises the representatives of all member countries and acts as the representative of the Ministerial Conference when it comes to daily operations. Its job is to carry out the implementation and monitoring function of the WTO.
  • The Dispute Settlement Body is a part of the General Council and is responsible for settling trade disputes between member states. There is also an Appellate Body, where member states can appeal any decisions made against them during a dispute settlement.
  • The Trade Policy Review Body is also a part of the General Council and is responsible for ensuring the trade policies of member states are in line with the goals of the WTO. Member countries are required to inform the WTO about changes in their laws and trade policies.