US should strengthen multilateral institutions

The swift takeover of Afghanistan by Taliban has significantly diminished the stature of President Joe Biden. Hopefully, that will not come in the way of his taking bold measures to strengthen the multilateral institutions or playing the leadership role in addressing the global issues.

The United States played a leading role in establishing the United Nations, World Bank, International Monetary Fund and many other international organisations. After the collapse of the Soviet Union, the US participated actively in the Uruguay Round of negotiations that culminated in the establishment of the World Trade Organisation (WTO). Soon after the

9/11 terrorists attacks in the US, the Doha Development Round was launched in December 2001 mainly due to the insistence of the US.

The rise of China as an economic power and backlash against globalization helped Donald Trump to win the US elections in 2016. During his administration, the US weakened the global institutions and took several unilateral steps in contravention of the WTO trade rules that provoked retaliatory actions from other countries. Meanwhile, the inability to reform the WTO trade rules or take forward the agenda for further trade liberalization encouraged many countries to enter into free trade agreements. The Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP) have emerged as significant trading blocks. Yet, these cannot bring the same extent of benefits as the multilateral trade agreements at the WTO. Under President Biden, the United States rejoined the Paris Climate Accord and World Health Organisation, cleared the appointment of Ngozi Okonjo-iweala as the seventh Directorgeneral of the World Trade Organisation (WTO), initiated the process to end the Boeing-airbus dispute with European Union and backed an agreement on global minimum corporate tax and reallocation of some taxing rights to countries where revenue is made. However, despite some efforts, very little progress has been made in ending the trade war with China, the unilateral tariffs on import of some goods on the pretext of security concerns or sanctions on some countries, institutions and individuals. The US has still not enabled the appointment of judges at the appellate body of the dispute settlement mechanism at the WTO.

Now, Europe, US and China want to encourage de-carbonization by raising penalties for carbon emissions. The US and EU are considering additional taxes on imported goods with a view to protect the domestic firms that are subject to carbon fees and more stringent environmental regulations. China has started a national carbon trading system. Some firms will get free allowances that they can trade. All such measures can provoke retaliatory tariffs from other countries leading to more disputes. Protectionism, unilateralism and trade wars can only create more frictions, slowdown global economic growth and worsen inequities.

The WTO is the only body that provides a forum for multilateral trade negotiations, periodic review of the trade policies and settlement of trade disputes between countries in an orderly manner. On global issues such as uniform trade rules, universal vaccination, climate change, biotechnology risks etc. all countries have to work together to meet the challenges. The US should, as the leading economic power, quickly rescue the moribund WTO dispute settlement mechanism and work with other countries to come up with meaningful initiatives to strengthen all multilateral institutions, including the WTO. India should aid that process.