Can the WTO Weather the Storm?

Initiatives to dismantle/redesign/reform the WTO (delete whichever is inapplicable according to your preference) continue apace.

Towards one end of the spectrum, USTR Jamieson Greer writes (in a recent New York Times op-ed) that “[O]our current, nameless global order, which is dominated by the World Trade Organization…is untenable and unsustainable.” Many of those closer to the WTO might offer a wry smile at the notion that the WTO could dominate anything.

Ambassador Greer also declared a “Trump Round”, although there is nothing even faintly multilateral about the current process of bilateral bullying.

In an earlier speech at a “Reindustrialize Summit” in Detroit in July, Ambassador Greer evoked the manufacturing heyday of the late 1940s which, he said, had been undermined in subsequent decades by foreign governments giving their businesses unfair advantages. There was no mention of other factors such as technology which might have contributed to a decrease in manufacturing employment.

While not wishing to bandy labels about, the words of the last GATT and first WTO Director-General, the magisterial and supremely eloquent Peter Sutherland, come to mind:

“Protectionists offer nothing more than an illusion – an illusion of time standing still in a golden age that never was.”

Despite the apparent contempt for the multilateral trading system, President Trump has appointed a new Deputy USTR, Joseph Barloon, to serve as ambassador to the WTO. A new American WTO Deputy Director-General (Jennifer Nordquist) has been appointed by Director-General Okonjo-Iweala to replace the retiring Angela Ellard (who has done such a good job). It may be that the U.S. Administration is not quite as hostile to the WTO as might initially be thought – although there is still a question mark over its contribution to the WTO budget. We wait to see how Ambassador Barloon approaches his role.Will he engage the U.S. actively in WTO affairs or will it remain largely disengaged; will he threaten, hector and lecture, or will he take a more subtle approach?

Meanwhile, on another part of the U.S. political spectrum, Michael Froman – USTR under President Obama – has also had the WTO on his mind, writing recently in Foreign Affairs about “Remaking Rules from the Ruins of the Rules-based System”. He is extremely pessimistic about the current state of the WTO, asserting that “[T]the World Trade Organization has ceased to function…” while “[C]clinging to the old system and pining for its restoration would be deluded and futile”. He may be at least half right on this last point: the WTO system is legitimately criticised for its inefficiency.

Has the WTO Really Ceased to Function?

But it is surely an overstatement to say that the Organization has ceased to function. Evidence of activity abounds: whether in well-reputed committee work such as on SPS, TBT, and Trade and the Environment; in accessions; in trade and services; or in trade policy reviews. This and other ongoing work, including on agricultural trade, is actively supported by large numbers of resident delegations in Geneva as well as in many cases officials visiting from capitals. A recent meeting of the Goods Council addressed 36 specific trade concerns as well as discussing “current trade tensions”. It is surely helpful in the present climate that there should be an international forum for exchanging views on these issues.

As Peter Ungphakorn and Robert Wolfe have pointed out in the excellent “Trade β Blog”, a large share of world trade (perhaps as much as 80-90 percent) continues to flow smoothly, complying with WTO rules, and kept reasonably honest by the ongoing work of the WTO.

Meanwhile, contrary to popular wisdom, the number of formal WTO dispute settlement cases is actually increasing: ten new cases have been initiated in the year to date, compared with five in the same period in 2024.

The U.S. has clearly forsaken foundational GATT/WTO obligations such as MFN, and others have been forced to play along with this as part of the price of concluding “deals” with Trump. However there is as yet no evidence of wholesale abandonment of key multilateral principles. The rules are still “binding” for those who have signed up to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) which mirrors an appellate body. Adherents include the EU, China, Brazil, Japan, the UK and Australia among others. For those outside the MPIA, the dispute settlement system remains in place, albeit without recourse at present to an appellate body.

There is also emerging evidence of new groupings coming together to bolster the rules-based trading system and trade openness – for example enhanced cooperation between the EU and CPTPP (more on this below) and a putative new initiative among smaller economies called the Future of Investment and Trade Partnership.

Business Interest Continues

Nor would it be true to say that business has lost interest. For example, a broad coalition of major U.S. agricultural groups continue to support U.S. membership and leadership in the WTO arguing that, while reforms are needed, the Organization has provided the economic and political stability which is vital to U.S. producers. These groups have strongly urged congressional leaders “to maintain and strengthen the United States’ role in the WTO.”

The Global Services Coalition is also actively working on another of its periodic visits to Geneva, planning to engage with both delegations and the Secretariat. The WTO’s moratorium on imposing customs duties on electronic transmissions, and the “joint statement initiative” and work programme on E-commerce continue to attract considerable business interest.

Results from a recent Hinrich Foundation survey “indicate that business respondents overwhelmingly do want the WTO, but they want a WTO that functions effectively and sets rules that help them prepare for the future. At the same time, they recognize that the WTO is an expression of collective will.”

Over the years, the business community has largely taken the WTO’s crucial contribution to predictability and certainty in the international trading environment for granted and assumed until recently – but perhaps no longer – that this would continue without much effort on their part. However, to be fair, business has also been very engaged when it believes that WTO negotiations might produce meaningful results, so it is also up to the WTO to sustain their interest through providing more action.

“Open Plurilateralism” – How Open?

To his credit, Michael Froman does see the continuing need for a rules-based trading system. He espouses building a new system around “open plurilateralism” or “coalitions of the willing” – by which he means “coalitions of countries that share interests in specific areas and come together to adopt high standards on certain issues, and then remain open to other countries that share similar interests and are prepared to implement those standards.”

He suggests that some such open plurilateral initiatives might focus on trade liberalisation while others might address regulatory harmonisation. Countries with similar national security interests could coordinate on technology transfer and industrial policy. The United States, he says, could forge a coalition aimed at building a competitive, collective industrial base to meet the China challenge.

This approach raises the question of how “open” such plurilateralism might be in practice. What seems to be being proposed is a set of discrete clubs each having its own membership rules and discriminating against non-members.

This is the nub of the matter, potentially presaging the balkanisation of the global trading system. It could result in the system dissolving into a network of competing clubs, with individual major trading powers acting as gatekeepers for their own grids of agreements. This is not the world that the very large number of medium and small economies would ideally want to live in.

Crucially, in Froman’s world “the WTO might wither, or it might persist in rump form for countries that have no more attractive coalitions to join.” Open plurilateralism may indeed be the way to go but there should be some guidelines to ensure that it reinforces rather than replaces the multilateral system.

EU–CPTPP Cooperation

The WTO has also been under fire on the other side of the Atlantic. In late June, European Commission president Ursula von der Leyen floated the suggestion that the EU should get together with the 12 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to redesign the rules-based global trading order, reforming or perhaps even replacing the World Trade Organization, which was described as largely defunct. German Chancellor Friedrich Merz endorsed this characterisation.

While the EU quickly rowed back on the suggestion of replacing the WTO, the fact that it was made might reflect disenchantment with the pace of reform. However, the obstacles to reform are often found in members’ capitals, not in the institution itself. For example, it is India which is almost single-handedly blocking further progress on current plurilateral initiatives in the WTO.

The idea of EU-CPTPP “structured cooperation” to revive the rules-based trading system has caught on.  CPTPP members have also welcomed a dialogue with the EU. Following up, the National Board of Trade Sweden recently published an analysis on “A New Trade Policy Era – the need for a rule-based trade coalition”.

The paper argues that the most realistic way for the EU to revive the rules-based trading system is to build new, WTO-supporting structures with like-minded partners, with the EU and CPTPP forming the core of such a coalition. It goes on to identify a number of potential areas for cooperation, and 56 potential coalition partners. Notable absentees include the United States, China and India.

This is an extremely helpful contribution to stimulate the debate. There are naturally a number of areas which will require further investigation.  First, what is the nature of the coalition? It would not seem to be a free trade agreement, or at least not initially. The NBTS suggests that its focus should be on cooperation and coordination, alongside a standstill commitment among coalition partners to refrain from taking new trade restrictive measures against each other.

Secondly however, there are many unknowns about how the many “deals” or frameworks the U.S. has struck with other countries will work in detail and in practice. It may yet prove problematic to operationalise a standstill commitment after the negative spillovers of the deals with the U.S. become more apparent. It is still early days.

Thirdly, there is a lurking apprehension that, in the light of the Turnberry deal with the U.S., the EU may not quite be the paragon it has long claimed to be. The EU appears to be about to accord favourable treatment to the U.S. alone in some agricultural, and possibly also industrial, products. It would be ironic if China were to usurp the mantle of defender of the multilateral faith by using the EU-inspired MPIA – of which both are adherents – to successfully challenge some aspects of Turnberry.

Finally, any initiative which omits the U.S., China and India may have a structural weakness. How are these and others to react? It seems unlikely that they would stand idly by.  Will they seek to form their own coalitions? The U.S. has a list of the usual suspects that might be persuaded to do its bidding. India might be delighted to be gifted another opportunity to wrap itself in the cloak of champion and chief spokesperson of the developing world.

This is certainly not to say that a “rule-based trade coalition” is inherently undesirable. On the contrary, it offers a positive potential pathway – but many challenges lie ahead.

Meanwhile, at Base Camp…

Coming last on this tour d’horizon to Geneva, members appear to be focusing on an outcome on WTO reform at the Fourteenth Ministerial Conference which will take place in Cameroon in March 2026. The capable and experienced Norwegian Ambassador Petter Ølberg is shepherding discussions and has identified three “indicative tracks”:

• governance (institutional issues)
• fairness (level playing field and balanced trade)
• “issues of our time”

Ølberg is realistic. He reports that there is a very wide range of perspectives on WTO reform and counsels that “[O]our goal is not solve every issue now. It’s to identify where ministers can add the guidance needed to move forward decisively after MC14”.

In other words, we will be fortunate if the WTO can launch a meaningful process on WTO reform next March, with no guarantee of when results might be forthcoming. There may be a danger here that those in the Geneva bubble will be swept aside by tides flooding in from elsewhere.

Managing Expectations

The WTO appears to lurch from crisis to crisis. To some extent this is deliberate, almost calculated. It is extremely difficult to coax a multilateral institution, responsible for a politically sensitive subject like trade and operating (because there is no practical alternative) according to consensus, into meaningful action. The time-honoured method of doing so, to the serious discomfort of successive Directors-General, has been to build the periodic ministerial conferences into cliff-hanging near-death experiences which then unfold according to arcane processes. Results are then categorised as either a “success” or a “failure”, although the truth is rarely so binary.

A case in point was MC12, held in Geneva in June 2022. The central theme was the negotiations on fisheries subsidies which had been running for over 20 years. MC12 was built up as the moment of truth but there was no movement during the conference on the most important chapter – subsidies contributing to overcapacity and overfishing. At the last minute major players therefore agreed among themselves to gut (pun intended) the  text relating to this issue. This move had however not been adequately foreshadowed and a number of small island states, unsighted, rebelled. After frantic consultations deep into overtime, a compromise was reached whereby the first stage of an agreement was approved, with a poison pill to the effect that it would self-destruct if further negotiations, which were to be continued on overfishing and overcapacity, did not deliver comprehensive disciplines. Victory was then declared, although in reality it was only partial.

This is instructive in at least two ways. First, the general approach to ministerial conferences seems almost insane, deliberately courting disaster. Yet curiously it appears to result in at least some progress more often than not. And MC12 also showed that, despite some sketchy processes, the WTO’s system of governance is flexible enough to enable the voices of smaller players to be heard and indeed to be taken into account in decision-making. This is a strong positive.

Secondly, the Organization did not deliver on the lofty initial ambitions but in the end, after admittedly taking far too long, there was a result and the system moved forward another notch. We should face the fact that, while it’s good to aim high, a complex and unwieldy institution like the WTO will rarely be trail-blazing. Expectations should be moderated.

What’s the Outlook?

We have to accept that it is part of the function of the WTO to act as a pressure valve for disputes and disagreements between countries over trade. In the process of carrying out this function the institution itself will inevitably come under fire for its limitations and deficiencies.

These limitations and deficiencies include some that are attributable to, and should be fixed by, the institution itself. But there are significant others – such as “hostage-taking” in negotiations and idiosyncratic national trade policies – the responsibility for which lies squarely with the membership itself. We should not fool ourselves into thinking that there is an institutional solution for everything.

Nevertheless, complacency is dangerous. The brainstorming now taking place not only about the WTO but also the wider trading system as a whole is overdue and welcome. It seems very unlikely in the present environment that major trading nations will be prepared to invest further authority in the WTO, so we may have to accept that the institution will remain relatively weak for the foreseeable future. Again, expectations need to be managed.

The WTO represents many different things to different members. An attempt to distil these diverse perspectives into a common vision, beyond a level of meaningless generality, under the banner of “reform” may prove to be a never-ending and ultimately futile quest. Such fears should not excuse a lack of effort. However, while all this is playing out, the WTO might productively concentrate on incremental, practical and technical progress in its areas of expertise, and on plurilaterals in WTO-supporting configurations.

If WTO members (other than the U.S.) hold their nerve, work together where they can, and produce some worthwhile if modest reforms – improving notifications and transparency might be a useful starting point – it should be possible to avert a general disintegration of the system. That would also increase the chances of the U.S. coming back to it at a later date.

Finally, current WTO Director-General Ngozi Okonjo-Iweala has said on many occasions that if the WTO didn’t exist we would have to invent it. This remains true.  With all its shortcomings, the WTO is a valuable and essential global asset. We need to navigate it between the reefs and rocks to a safe harbour.