Reclaiming the WTO’s Practical Mission: A Thought Experiment in WTO Reform
The General Agreement on Tariffs and Trade (GATT), the predecessor of the World Trade Organization (WTO), emerged as a postwar response to economic nationalism. Like the United Nations, which sought to prevent another world war, the GATT aimed to avert the kind of trade wars unleashed by the Smoot-Hawley Tariff Act of 1930.
Some now argue that the U.S. unilateral tariffs have upended this system. Yet I contend otherwise.
Yes, Washington has imposed unilateral tariffs and the Appellate Body remains frozen. But the United States still accounts for less than 20% of global trade. More important, other countries have not turned on each other. Most WTO members continue to uphold non-discrimination, and panels are still hearing disputes. Despite rhetorical threats, the U.S. has not exited the WTO as it did the World Health Organization.
That said, the tariffs exposed deeper fragilities. Long seen as one of the most successful postwar institutions, the WTO now finds itself drifting. Developed countries complain about inaction on digital trade, climate-related trade policy, and supply chain resilience. Developing members remain disillusioned by the stillborn Doha “Development” Round. The institution faces an identity crisis.
Rethinking Reform from the Ground Up
Many reform proposals are circulating, but they are increasingly exposed to a theater for statecraft, focused on great power competition.
But here is the core problem: governments do not conduct trade. Businesses and consumers do.
If the WTO is to remain viable, it must reorient itself around the actors that make trade happen.
Some encouraging ideas are already on the table.
Let me suggest three additional priorities.
1. A Grand Bargain between North and South
The impasse between developed and developing members could be addressed through mutual concessions. Emerging economies might allow progress on plurilateral agreements in areas such as e-commerce, services, or environmental goods. In return, advanced economies could recommit to development issues, reviving neglected Doha items such as agricultural reform and special and differential treatment.
This kind of package deal would not require a grand “single undertaking,” but it could reinject strategic balance and fairness into WTO negotiations. If realized, this kind of grand bargain could restore much-needed confidence in the global business community.
2. More Emphasis on Mediation
Dispute settlement remains a pillar of the WTO. But excessive litigation risks turning trade into a proxy battlefield. The Director-General’s “good offices” mechanism, which enables informal mediation, is underused. It should be revitalized as a proactive channel for de-escalating tensions and promoting early settlement.
More mediation would not only take pressure off the system but also help reassure the private sector that the WTO remains a reliable forum.
3. New Forms of Funding
Though a member-driven organization, the WTO has legal personality and could accept voluntary contributions under defined conditions. Carefully vetted, targeted funding, from philanthropic foundations, development banks, or private-sector partners, could support initiatives on digital transformation, climate-trade interface, and capacity building.
Financial flexibility would enhance responsiveness and help the WTO deliver where it matters most.
Firms, Not States, Bear the Burden
Trade wars rarely wound governments themselves; the real casualties are firms. One WTO panel aptly observed that the multilateral trading system is “composed not only of States but also, indeed mostly, of individual economic operators.” That observation should be front and center in any reform effort.
And businesses want the WTO to succeed. According to a 2022 WTO Business Survey, 95% of firms said the WTO’s work is vital to their operations.
The WTO Secretariat needs to go beyond symbolic outreach and give the business community a real seat at the table.