Question

How would you reconcile the complaints of the worldwide community and the U.S. point of view if you were in charge of the WTO?

Answer 1

World Trade Organization came into being on Jan 1, 1995 at Geneva as a part of Marakkas agreement, signed on 15th April, 1994.

It succeeded GATT.

Objectives of WTO:

• Raise the standard of people throughout the world.
• Increase demands of goods and total employment
• Increase production and trade of goods
• Increase and promote trade of services
• Ensure appropriate utilization global resource
• subscribe sustainable development
• Conservation & preservation of environment

Function of WTO:

• Facilities for execution, administration and conduct of world trade agreement, multilateral and plurilateral agreements
• Forum for consultation among members states w.r.t any matter related to trade and tariff.
• Settlement of disputes among member states
• Rules and provisions related to Trade Policy Review Mechanism
• Cooperate with World Bank & IMF
• Appropriate utilization of world resources.

Administrative Structure of WTO:

WTO is not an agency of UNO like IMF and World Bank; it has its independent status. 164 countries have become member states of WTO.
WTO is more powerful in regulating international trade in comparison to its predecessor GATT.
Ministerial Conference is the highest decision making body and constitute of Trade ministers of member states which meet every 2 years.

So WTO is a kind of regulatory body which regulate international trade and settles trade dispute as global trade rule.Here is issue between INDIA and USA which has been decided by WTO

Origin:-

In 2010, India launched its national solar programme, which aims at adding 1,00,000 MW of solar power capacity by 2022.

So, govt. wanted to incentivize the production of solar energy within the country. Therefore, they agreed to enter into long-term power purchase agreements with solar power producers, providing the guarantee for the sale of the energy produced. Thereafter, it would sell such energy through distribution utilities to the ultimate consumer.

However, there was a clause that a solar power producer, to be eligible to participate under the programme, is required compulsorily to use certain domestically sourced inputs, namely solar cells and modules for certain types of solar projects. In other words, unless a solar power producer satisfies this domestic content requirement, the govt will not ‘guarantee’ the purchase of the energy produced.

India’s argument:-

India principally relied on the ‘govt procurement’ justification, which permitted countries to deviate from their national treatment obligation provided that the measure was related to “the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in production of goods for commercial sale”.

India also argued that the measure was justified under the general exceptions since it was necessary to secure compliance with its domestic and international law obligations relating to ecologically sustainable development and climate change.

US argument:-

In 2013, the U.S. brought a complaint before the WTO arguing that the domestic content requirement imposed under India’s national solar programme is in violation of the global trading rules.

It said that India has violated its “national treatment” obligation by unfavourably discriminating against imported solar cells and modules. In other words, India was discriminating between solar cells and modules (which were otherwise identical) on the basis of the national ‘origin’ of the cells and modules, a clear violation of its trade commitment.

Us has argued that India can achieve its clean energy goals faster and more cost-effectively by allowing solar technologies to be imported from the US and other producers.

Judgement:-

WTO concluded that India had violated its national treatment obligation, by imposing a mandatory domestic content requirement. The panel found India violated global trade rules by imposing local content requirements for solar cells and solar modules.

Agreement’s Violated:

India violated its commitments under the global trading rules, specifically the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade Related Investment Measures (TRIMs).

Explanation:

The product being subject to the domestic content requirement was solar cells and modules, but the product that was ultimately procured or purchased by the govt was electricity. Therefore, the domestic content requirement was not an instance of “government procurement”.

Source:-dispute settlement - the disputes - DS456