Editorials/Opinions Analysis For UPSC 24 December 2022
- Global trade lawlessness worries U.S. actions
- First talks after Tawang, on LAC stability in Ladakh
Global Trade Lawlessness Worries U.S. Actions
- Four separate World Trade Organization (WTO) panels recently ruled against the United States’ decision to impose import duties on steel and aluminium in 2018, which sparked a global trade war.
- This is a significant development in international trade law because these tariffs were found to be inconsistent and in violation of WTO rules, setting a bad example for other countries and challenging the rule-based liberal trade order.
GS Paper 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
“The WTO’s inability to control global trade tensions has raised concerns about its relevance in today’s world.” Examine. (150 Words)
World Trade Organization (WTO)
- The Geneva-based 164-member WTO is a multilateral body that formulates rules for international trade (exports and imports) and adjudicates trade-related disputes between two or more countries.
- It describes itself as a “member-driven,” “consensus-based” organisation, representing over 98% of global trade and GDP. o It officially began operations on January 1, 1995, in accordance with the 1994 Marrakesh Agreement, thus replacing the 1948 General Agreement on Tariffs and Trade (GATT).
- Organizational structure: o The WTO’s highest authority is the Ministerial Conference, which is made up of all member countries and usually meets biennially (every two years), with consensus being emphasised in all decisions.
- The daily work is handled by three bodies with the same membership. The only distinction is the terms of reference under which each body is established.
- The Dispute Settlement Body (DSB): o It decides the outcome of a trade dispute based on the recommendation of a Dispute Panel and possibly a report from the World Trade Organization’s Appellate Body.
- The Appellate Body is a standing body of seven people who hear appeals from panel reports, which may have amended the Panel recommendation if a party chose to appeal.
- Panels and the Appellate Body can only make recommendations; only the DSB has the authority to make these decisions.
- During Donald Trump’s presidency, the United States imposed 25% and 10% tariffs on steel and aluminium, respectively, citing unfair competition and national security interests.
- The WTO panel found that these tariff rates violated the United States’ obligations under the General Agreement on Tariffs and Trade (GATT) and recommended that the United States bring them into compliance.
- The GATT requires countries not to impose tariffs above the bound rates.
- The bound rate is the maximum rate of duty (tariff) that an importing country can impose on an imported commodity.
- Furthermore, these tariffs violated Article I of GATT because they discriminated against some foreign producers of steel and aluminium over others. For example, Canada, Mexico, and its allies such as Japan, the United Kingdom, and the European Union were exempt from these tariffs.
- As a result, countries such as China, Norway, Switzerland, and Turkey filed WTO complaints against the United States.
Reasons for Tariff Increases in the United States
- National security reasons: The United States defended its tariff increases under GATT Article XXI, which allows countries to deviate from trade obligations for national security reasons.
- This article allows a country to take any action “which it considers” necessary to protect its essential security interests during a war or other international emergency.
- Emergence of a new economic order: Today’s international economic order is shifting away from the post-Cold War neoliberal order and toward a new geoeconomic order.
- In the neoliberal order, economic and security interests ran relatively distinct tracks, and the US, as its undisputed hegemon, promoted free trade and interdependence because it did not fear the rise of strategic adversaries such as China. o However, convergence of independent economic and security tracks heralded the geo-economic order, in which countries such as the US embraced protectionism as the size gap between the Chinese and American economies began to narrow.
- The American consensus on geoeconomic order is clear, as both the Trump and Biden administrations supported tariffs in the name of national security.
- Avoid international scrutiny: The United States has increasingly used national security jargon to justify such economic nationalism in an effort to limit the possibility of international courts reviewing state action.
- Against China’s unfair trade practises: The US stated that its tariffs were primarily aimed at China, which has for years sold its steel at below-market prices due to unfair government support.
- Environmental concerns: The United States claimed that its tariffs promote trade in metals produced in ways that reduce carbon emissions and impose tariffs on metals that are deemed to pollute too much.
- Protect domestic industry: The United States stated that tariffs were required to protect domestic manufacturers from global metal overproduction.
Observations of the WTO
- The United States’ assertion regarding the national security rule in Article XXI is not entirely’self-judging,’ and the WTO can review a state’s action taken ostensibly to protect its national security.
- It follows previous WTO jurisprudence established in the Russia-Transit and Saudi Arabia-IPR cases.
- The Panel also rejected the United States’ argument that its increased tariff rates are the result of global excess capacity, which could have resulted in excessive imports of these two commodities used in defence production, jeopardising the United States’ national security.
- The WTO panel also observed that if the country does not abide by the decision, the countries that brought the complaints are entitled, under WTO rules, to impose retaliatory and punitive tariffs on US products.
How did the United States react to the WTO ruling?
- The Biden administration rejected the WTO Panel’s ruling, calling it “flawed,” because the WTO has no authority to decide US national security policy, and thus refused to remove the illegal tariff rates.
- The United States could appeal the ruling, putting it in legal limbo because Washington has blocked appointments to the WTO Appellate Body, rendering it incapable of issuing a decision.
- Unlike Neoliberalism, which was founded on the principles of non-discrimination in international economic relations and peaceful dispute resolution through neutral international courts, the new geoeconomic order risks “international trade lawlessness.”
- With rising geopolitical tensions in the current scenario, other countries may also invoke the national security exception and boldly pursue unilateralism and economic nationalism.
- This ruling is thus significant not only for members’ future policies, but also for how it affects their overall support for the WTO system and adherence to a rule-based order.
First Talks After Tawang, On LAC Stability in Ladakh
The 17th round of the corps-commander-level meeting was recently held on the Chinese side of the border at the Chushul-Moldo border crossing point. During the meeting, India pressed China for an early and complete disengagement from the remaining points of contention, including Demchok and Depsang.
GS Paper – 2: India and its Neighbourhood, Government Policies & Interventions
“The United States faces an existential threat from China that is far more difficult to overcome than the former Soviet Union.” Explain. (250 words)
- In May 2020, Indian and Chinese troops clashed at various points along the Line of Actual Control (LAC), including: o Pangong Tso, Galwan Nalah, and Demchok in Ladakh, and at Naku La (a mountain pass at an altitude of over 5000 metres) in Sikkim.
- Later, on the night of June 15, 2020, a violent clash began between Indian troops and soldiers of the People’s Liberation Army (PLA).
- It was India and China’s first deadly clash in at least 45 years.
- As a result of this incident, both sides deployed a large number of troops in the area, along with heavy weaponry.
- Infrastructure construction has also been extensive, and the standoff between the two forces continues.
Conversations at the Corps Commander level
- To resolve the standoff, India and China have been holding talks on the Line of Actual Control (LAC) in Eastern Ladakh.
- Prior to the current talks, the two countries held 16 rounds of Corps Commander-level talks, with the 16th round taking place in July 2022.
Previous rounds of negotiations’ outcomes
- Troops were disarmed on the north and south banks of the Pangong Tso, as well as at Gogra Post.
- However, they continue to face each other in Hot Springs.
- China has refused to complete the stalled troop disengagement at Patrolling Point (PP) – 15 in the Hot Springs-Gogra-Kongka La area, and has also denied Indian troops access to five traditional patrolling points on the Depsang Plains.
- The traditional patrolling numbers are PP10, PP11, PP11A, PP12, and PP13.
- The Depsang plains are not far from Daulat Beg Oldie, a strategic Indian outpost near the Karakoram Pass in the north.
- The no-patrol buffer zones were established following disengagement at o PP-14 in Galwan Valley, o PP-17A near Gogra, and o Pangong Tso. However, these zones have mostly appeared in what India claims to be its territory.
- Indian and Chinese military commanders held a new round of high-level talks to resolve the remaining issues along the Line of Actual Control in eastern Ladakh.
- During the meeting, India pressed China for an early and complete withdrawal from the remaining points of contention, including Demchok and Depsang.
- India maintained that disengagement, followed by de-escalation, is required for bilateral relations to normalise.
- China, on the other hand, believes the border situation in eastern Ladakh is no longer as serious as it was in 2020, when the military standoff began, and wants to resume bilateral talks.
- However, there was no sign of progress in the talks.
- In a joint statement issued following the meeting, they agreed to maintain security and stability in the western sector, as well as to continue dialogue in order to resolve the remaining issues as soon as possible.