WTO faces pressure as India blocks China-backed pact

Talks to reform the World Trade Organization and extend a moratorium on customs duties on electronic transmissions entered their final day on Sunday with no breakthrough in sight, diplomats said.

Trade ministers meeting in Yaounde, Cameroon, are attempting to bridge differences between the US and India over extending the e-commerce moratorium, which is due to expire this month, three diplomats told Reuters.

The outcome is being seen as a test of the WTO’s relevance after a year marked by tariff-driven trade tensions and disruptions linked to the Middle East conflict.

India has indicated it would accept an extension of two years, diplomats said. US Trade Representative Jamieson Greer, however, has said Washington is not interested in a temporary extension and is seeking a permanent solution.

Business leaders have said an extension is critical to ensure predictability, warning that duties could otherwise be introduced on digital transmissions.

Diplomats said a compromise is being explored. One western diplomat suggested the US could accept a “pathway to permanence” involving a 10-year extension. Another said a five- to 10-year timeframe was under discussion, while a third indicated it was unlikely all WTO members would agree to go beyond a two-year extension.

A draft document circulated on Saturday evening proposes support for developing countries and includes a review clause, according to sources.

US Ambassador to the WTO Joseph Barloon said ahead of the talks that a permanent extension would give Washington confidence to remain “fully engaged” in the organisation.

“If the moratorium does not get extended, the US will use it as an excuse to beat the WTO on the head,” a fourth senior diplomat said.

India blocks China-led investment pact

Alongside the e-commerce dispute, India on Saturday said it has strongly opposed the China-led Investment Facilitation for Development (IFD) Agreement and its incorporation into the WTO framework.

Commerce and Industry Minister Piyush Goyal said in a social media post that incorporating the IFD agreement risks eroding the functional limits of the WTO and undermining its foundational principles.

This position was stated during the ongoing 14th ministerial conference of the WTO in Yaounde.

“At #WTOMC14, drawing inspiration from Mahatma Gandhi ji’s philosophy of Truth prevailing over conformity, India showed the courage to stand alone on the contentious issue of the IFD Agreement and did not agree to its incorporation into the WTO framework as an Annex 4 Agreement,” he said.

Annex 4 of the WTO Agreement contains plurilateral trade agreements that are binding only on members that have accepted them, unlike mandatory multilateral agreements.

Goyal said members are discussing guardrails and legal safeguards for plurilateral agreements under WTO reform discussions before integrating any such outcomes.

“In view of the systemic issue at hand, India showed openness to have good faith, comprehensive discussions and constructive engagement under the WTO Reform Agenda,” he added.

India had also opposed the pact at the previous ministerial conference in Abu Dhabi.

The IFD proposal, first mooted in 2017 by China and supported by countries reliant on Chinese investment and sovereign wealth funds, would be binding only on signatory members.

Reform push faces divisions

The negotiations are also taking place amid broader efforts to reform WTO rules, including making subsidy use more transparent, simplifying decision-making and reconsidering the Most-Favoured-Nation principle, which requires members to extend trade benefits equally.

The US and the European Union argue that China has taken advantage of existing rules to their detriment.

The WTO’s consensus-based system has also come under strain, with diplomats noting that individual countries have often blocked progress.

Two senior diplomats said a small number of countries are opposing a detailed reform work plan, while most members support it.

“We are frustrated that we are spending a lot of time talking about process, when we want to get on with the real work, reforming the WTO,” a western diplomat said.

Efforts to incorporate agreements backed by a subset of members into WTO rules, including the IFD pact, remain stalled due to India’s opposition, which it says risks weakening the organisation’s core principles.

(With inputs from agencies)