Syllabus
GS Paper 2 – Important International institutions, agencies, for a (structure, mandate); Bilateral, Regional, Global groupings & Agreements (involving and/or affecting India)
Context
The artful settlement of complex disputes during litigation, or broadly ‘litigotiation’, was key to solving the long pending India- U.S. poultry dispute.
Source
The Hindu| Editorial dated 10th June 2024
Settling trade disputes through ‘litigotiation’
In international diplomacy, managing trade disputes often involves delicate negotiations, balancing immediate issues with broader bilateral ties. Recently, India and the U.S. have demonstrated a remarkable capacity to resolve long-standing trade conflicts, culminating in the settlement of seven World Trade Organization (WTO) disputes.
WTO’s Dispute Settlement Mechanism
- Consultations
- Initial Step: Before initiating a formal dispute, the complaining party must request consultations with the defending party to try resolving the issue amicably through negotiations.
- Time Frames: Consultations must be held within specific time frames, encouraging the parties to find a mutually agreeable solution.
- Initial Step: Before initiating a formal dispute, the complaining party must request consultations with the defending party to try resolving the issue amicably through negotiations.
- Panel Establishment
- Request for Panel: If consultations fail, the complaining party can request the establishment of a dispute settlement panel, overseen by the Dispute Settlement Body (DSB).
- DSB Authority: The General Council, acting as the DSB, has the authority to:
- Establish dispute settlement panels,
- Refer matters to arbitration,
- Adopt panel, Appellate Body, and arbitration reports,
- Monitor the implementation of recommendations and rulings,
- Authorize suspension of concessions if there is non-compliance.
- Panel Composition: The panel is made up of independent experts in trade law and the specific subject matter of the dispute. They review arguments from both sides and issue a report.
- DSB Authority: The General Council, acting as the DSB, has the authority to:
- Request for Panel: If consultations fail, the complaining party can request the establishment of a dispute settlement panel, overseen by the Dispute Settlement Body (DSB).
- Panel Report
- Content: The panel’s report includes findings of fact, legal interpretations, and recommendations for resolution.
- Circulation: The report is circulated to all WTO members for review and comment.
- Content: The panel’s report includes findings of fact, legal interpretations, and recommendations for resolution.
- Adoption or Appeal
- Adoption: The DSB adopts the panel report unless there is a consensus against it.
- Appeal: If consensus is not reached, the matter can be appealed to the Appellate Body.
- Adoption: The DSB adopts the panel report unless there is a consensus against it.
- WTO’s Appellate Body
- Establishment: Created in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
- Composition: A standing body of seven members who serve four-year terms.
- Function: The Appellate Body hears appeals from panel reports, and can uphold, modify, or reverse the legal findings and conclusions.
- Finality: Appellate Body reports, once adopted by the DSB, are binding on the parties to the dispute.
- Location: The Appellate Body is based in Geneva, Switzerland.
- Establishment: Created in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
The World Trade Organization’s Appellate Body is currently non-functional. The United States blocked appointments of new members since 2019, critical for the body to operate.
Resolution of the Poultry Dispute between India and US
- Background:
- The poultry dispute was initiated by the U.S. in 2012 over India’s import restrictions on poultry products due to avian influenza concerns.
- It was the oldest of the seven disputes and involved sanitary and phytosanitary (SPS) measures.
- The U.S. argued that India’s measures deviated from internationally recognized standards and lacked scientific justification.
- WTO Rulings:
- Both the WTO panel and the Appellate Body ruled in favor of the U.S., mandating India to amend its measures.
- Settlement:
- After a decade, India avoided a $450 million annual retaliation claim by agreeing to reduce tariffs on select products, marking a significant diplomatic breakthrough.
Significance India- US Trade Dispute Settlement
- The collective resolution of 7 disputes including poultry, represents an unprecedented achievement in international trade dispute settlement.
- Importance of Diplomatic Channels
- The resolution highlights the effectiveness of bilateral diplomatic channels, especially in the absence of a functional WTO Appellate Body.
- The disputes covered a range of issues, from subsidies to SPS measures, showcasing the complexity handled through diplomacy.
- Stable Trade Environment:
- This diplomatic success fosters a more stable international trade environment where disputes are managed proactively.
- India-U.S. Partnership:
- The settlements, along with India’s participation in the U.S.-led Indo-Pacific Economic Framework , strengthen the India-U.S. partnership.
Conclusion
The resolution of seven WTO disputes between India and the U.S. represents a significant diplomatic achievement, highlighting the efficacy of bilateral negotiations in resolving complex trade issues. This development not only strengthens India-U.S. economic relations but also sets a precedent for managing international trade conflicts in the absence of functional multilateral bodies.
References
Related PYQ
What are the key areas of reform if the WTO has to survive in the present context of ‘Trade War’, especially keeping in mind the interest of India? [ UPSC Civil Services Exam – Mains 2018]
Practice Question
Discuss the significance of the recent settlement of WTO trade disputes between India and the U.S? [250 words]