Do Trump's new tariffs cross WTO boundaries? In-depth look

As trade tensions rise, the World Trade Organization's principles are put to the test, particularly concerning tariffs and the treatment of developing nations. The World Trade Organization (WTO), established in 1995, operates on core principles like non-discrimination, freer trade through negotiation, predictability, and special consideration for developing countries. However, recent trade actions, such as the US imposing reciprocal tariffs, have sparked debates about the WTO's effectiveness and fairness, especially concerning developing nations.

Tariff Commitments and Potential Violations

The WTO ensures stability in global trade through tariff binding, where member countries commit to maximum tariff rates. Imposing tariffs above these bound rates violates the General Agreement on Tariffs and Trade (GATT). Affected countries can file complaints with the WTO Dispute Settlement Body (DSB), potentially leading to retaliatory tariffs if consultations fail. While countries can increase bound tariff rates through negotiation, the US's actions under the Trump administration, such as imposing tariffs on steel and aluminum, were contested, with the WTO ruling against the US's justification of "national security".

The Developing World's Perspective

Developing countries often maintain higher import duties to protect domestic industries and foster economic development. Historically, developed nations agreed to this in exchange for developing countries' commitments on intellectual property rights, services trade liberalization, and agricultural rules. The WTO provides "special and differential treatment" to developing countries, allowing them more time to reduce tariffs and export subsidies.

India's Position Amidst Trade Tensions

Despite having the right to challenge tariffs on steel and aluminum at the WTO, India may hesitate due to ongoing trade negotiations with the US. Experts suggest India should prioritize its interests and consider retaliatory tariffs while keeping the WTO dispute option open. They also emphasize the importance of India collaborating with other WTO members to strengthen the organization, especially given concerns about its dispute resolution mechanism.

The Future of the WTO

As countries navigate trade disputes and protectionist measures, the WTO's role in maintaining a rules-based multilateral order is crucial. The organization faces challenges in ensuring fair competition and addressing the specific needs of developing countries. Finding a balance between protecting domestic industries and promoting free and predictable trade remains a central task for the WTO in the evolving global economic landscape.