India has sought arbitration proceedings under WTO rules against Australia to settle an issue related to the services sector as it could impact New Delhi’s services trade.
Concerns Raised by India Against Australia
- In February 2024 in Abu Dhabi, over 70 WTO nations agreed to Joint Statement Initiatives (JSIs) to take additional obligations under the General Agreement on Goods in Services (GATS) to ease non-good trade among themselves and extend similar concessions to all other members of the WTO.
- GATS is a WTO agreement that came into force in 1995. India has been a member of the Geneva-based organisation since 1995.
- These obligations seek to mitigate unintended trade restrictive measures relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards among themselves.
- It will also benefit Indian professional companies which will now have equal opportunity to access markets in these 70 countries if they meet the standards.
- As per estimates, the move will help reduce services trade costs by 10% for lower-middle-income economies and 14% for upper-middle-income economies, with overall savings of USD 127 billion.
Opposition to Joint Statement Initiatives
- The new agreement in Abu Dhabi is a plurilateral agreement where just 72 out of 164 WTO members are a party.
- India, South Africa, and many WTO members haven’t agreed to this deal, and India, like other developing nations, opposed various Joint Statement Initiatives (JSIs) because they’re not negotiated by all members.
- Experts argue that this trend of integrating Joint Statement Initiatives (JSI) into WTO will weaken the WTO and pave the way for adopting many more such JSIs on investments, Micro, Small and Medium Enterprises (MSME), gender, and e-commerce.
- Australia’s adherence to its commitments under a JSI is a point of contention in the dispute.
The Australia Case
- In 2023, Australia notified the WTO about intention to modify its schedule of specific commitments under the GATS to incorporate additional commitments relating to services domestic regulation.
- As an “affected member”, India has stated that Australia’s intended modification of its specific commitments does not satisfy certain conditions.
- Despite negotiations between India and Australia, no agreement was reached.
WTO’s Dispute Settlement Mechanism
Consultations
- Before initiating a formal dispute, the complaining party must request consultations with the defending party. This is the first step in attempting to resolve the dispute amicably through negotiations.
- Consultations must be held within specific time frames, and the parties involved are encouraged to find a mutually agreeable solution.
Panel Establishment
- If consultations fail to resolve the dispute, the complaining party can request the establishment of a dispute settlement panel. The Dispute Settlement Body (DSB) oversees this process.
The General Council convenes as the DSB to deal with disputes between WTO members. The DSB has the authority to:
- establish dispute settlement panels,
- refer matters to arbitration,
- adopt panel, Appellate Body and arbitration reports,
- maintain surveillance over the implementation of recommendations; and
- authorise suspension of concessions in the event of non-compliance with those recommendations and rulings.
The panel is composed of independent experts with relevant expertise in trade law and the subject matter of the dispute. The panel examines the case, reviews arguments from both sides, and issues a report.
Panel Report
- The panel’s report includes findings of fact, legal interpretations, and recommendations for a resolution. It is circulated to all WTO members, allowing them to review and provide comments.
Adoption or Appeal
- The report becomes the Dispute Settlement Body’s ruling or recommendation within 60 days unless a consensus rejects it.
WTO’s Appellate Body
- The Appellate Body was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).
- It is a standing body of seven persons that hears appeals brought by WTO Members. The members of the appellate body serve for a four-year term.
- It can uphold, modify or reverse the legal findings and conclusions of a panel.
- Appellate Body Reports, once adopted by the DSB, must be accepted by the parties to the dispute.
- The Appellate Body has its seat in Geneva, Switzerland.
Implementation of Recommendations
- If a WTO member is found to violate its obligations, it is expected to bring its measures into compliance with WTO agreements.
- If the member fails to do so, the complainant may seek authorisation to retaliate through the suspension of concessions or other measures.