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India Blocks China-led Investment Facilitation Proposal at WTO

Context:

India, along with South Africa, successfully blocked a key proposal led by China at the World Trade Organisation.

Relevance:

GS III- Indian Economy

Dimensions of the Article:

  1. About Investment Facilitation Development Agreement (IFD)
  2. World Trade Organization (WTO)
  3. Functions of WTO
  4. What is the WTO’s Ministerial Conference?

About Investment Facilitation Development Agreement (IFD):

  • It is a WTO-negotiated agreement being discussed among the members.
  • The IFD, first proposed in 2017, aims to streamline investment procedures and facilitate cross-border investments, thus creating a more transparent, predictable, and streamlined environment for investors.
  • However, it has attracted criticism for potentially favoring countries heavily reliant on Chinese investments and those with sovereign wealth funds.
  • This is not the first time India has voiced its opposition to the IFD. The country previously blocked the proposal in December 2023 and at the WTO’s General Council Meeting.
  • What are the concerns?
    • However, India raised several concerns regarding the Investment Facilitation Development Agreement.
    • Firstly, India argued that the IFD falls outside the scope of the WTO, as it is not strictly a trade issue beyond the scope of the Marrakesh agreement.
    •  Secondly, India pointed out that the IFD does not fulfill the criteria for a formal agreement as it hasn’t received unanimous support from all WTO members, thus lacking the exclusive consensus required.
  • Hence, with India and South Africa’s objection, the IFD is unlikely to be adopted by the WTO in its current form.
  • This development could lead to further discussions and potential revisions to the agreement or its complete

World Trade Organization (WTO)

  • The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations.
  • It is the largest international economic organization in the world.
  • The headquarters of the World Trade Organization is in Geneva, Switzerland.
  • The WTO deals with regulation of trade in goods, services and intellectual property between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments.
  • The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.
  • Trade-related disputes are resolved by independent judges at the WTO through a dispute resolution process.
  • The WTO has 164 members (including European Union) and 23 observer governments (like Iran, Iraq, Bhutan, Libya etc.)
  • India is a founder member of the 1947 GATT and its successor, the WTO.

Functions of WTO

  • Trade negotiations: The WTO agreements cover goods, services and intellectual property. They spell out the principles of liberalization, and the permitted exceptions. They set procedures for settling disputes.
  • Implementation and monitoring: WTO agreements require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted. Various WTO councils and committees seek to ensure that these requirements are being followed and that WTO agreements are being properly implemented.
  • Dispute settlement: The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly.
  • Building trade capacity: WTO agreements contain special provision for developing countries, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities, and support to help them build their trade capacity, to handle disputes and to implement technical standards.
  • Outreach: The WTO maintains regular dialogue with non-governmental organizations, parliamentarians, other international organizations, the media and the general public on various aspects of the WTO and the ongoing Doha negotiations, with the aim of enhancing cooperation and increasing awareness of WTO activities.

What is the WTO’s Ministerial Conference?

  • The MC is at the very top of WTO’s organisational chart.
  • It meets once every two years and can take decisions on all matters under any multilateral trade agreement.
  • Unlike other organisations, such as the International Monetary Fund or World Bank, WTO does not delegate power to a board of directors or an organisational chief.
  • All decisions at the WTO are made collectively and through consensus among member countries at varied councils and committees.
  • This year’s conference took place in Geneva, Switzerland.  

-Source: The Indian Express, The Hindu, AIR     


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