The WTO in the Age of Trump’s Trade Bullying – Should There Be WTO Reform?

Something doesn’t add up. In Geneva, countries continue to profess undying commitment to the WTO. Meanwhile, their governments back home scramble for deals with Washington – deals which undermine the multilateral trading system by violating the ‘most-favoured nation’ principle.

A degree of sympathy might be in order. In a situation not of their own making, and with economic prosperity and potentially thousands of jobs on the line, it’s hardly surprising that politicians should trim their sails. In 2007, discussing European economic reform, Jean-Claude Juncker, then Prime Minister of Luxembourg, commented: “We all know what to do, but we don’t know how to get re-elected once we have done it.”

The same might now apply to many governments when contemplating a principled response to current U.S. bullying trade tactics.

It remains to be seen whether – relations with the U.S. apart – countries will at least stick to their obligations towards each other. This can by no means be taken for granted. There’s a good chance that the system as a whole will be destabilised.

WTO Reform – A Placebo

A convenient placebo to resolve the contradiction between principled adherence to the multilateral rules and instincts of short-term self-preservation lies in the shape of the subject known as ‘WTO reform’. This has long been used by the G20, among others, as a lightning conductor to deflect criticism and manage trade frictions. Now it is set to take centre stage at the next WTO Ministerial Conference in Cameroun in March 2026.

Advocates of WTO reform sometimes give the impression that there is an institutional fix to the problems plaguing the world trading system. The WTO has gone astray, which explains why we now have a trade war on our hands. This verges on a cargo cult mentality – if only we can find the magic institutional formula, trade frictions will go away.

Self-evidently it is the trade policies of national governments (especially of course the U.S.) that have produced the current turmoil. But, rather than facing up to that, it’s much more convenient to blame a weakened and frail international organisation. In this particular context, incidentally, it is noteworthy that the usual ‘member-driven’ mantra in the WTO conveniently does not apply.

Reform to What End?

This is certainly not to say that the WTO system does not have important defects. The dispute settlement system became overly judicialised. Decision-making has become bogged down and results from negotiations have on the whole been disappointing. But it is still pertinent to ask who is mainly responsible for that – the institution or the members?

The picture is further clouded because there is no clear common objective of reform. Is it to make the institution more efficient, including in its ability to take decisions; to address a deficiency in the transparency of members’ trade measures and policies; to reform dispute settlement and resurrect the Appellate Body; to prioritise economic development issues and provide more policy space; or simply to appease the U.S.? These are not mutually exclusive but priorities vary significantly from respondent to respondent.

The U.S.’s grievances towards the WTO are well advertised. They include judicial overreach, inability to grapple with state capitalism, excessive carve-outs for developing countries, and paralysed decision-making. Having staked out its position, the U.S., while not yet walking away from the WTO, seems happy to sit back, let others negotiate with themselves and wait for the concessions to flow in.

The reform agenda is huge and cannot adequately be dealt with here, so what follows are necessarily just a few selective reflections.

Dispute Settlement – Zero for the Appellate Body?

The U.S. surely has a point in arguing that the WTO’s Appellate Body is not an international court. The purpose of the dispute settlement system is just that – to settle disputes, not issue so-called ‘binding’ decisions. Responsibility for judicial overreach lies partly with the governments bringing cases to clarify the many grey areas in WTO agreements – as the U.S. sees it, trying to achieve through litigation what they failed to achieve in negotiation. However, while some of the agreements are indeed riddled with inconsistencies – hardly surprising since these are the result of complex negotiations – the Appellate Body might on occasion have done more to push back and tell the members to sort these out themselves.

The main specific context for U.S. dissatisfaction has been in Appellate Body rulings on trade remedies. These instruments were originally used quite sparingly to counter allegedly ‘unfair’ trade between developed countries but, later, developed countries started to employ anti-dumping more frequently to limit imports from developing countries. Developing countries regarded this as deeply unfair, designed to frustrate their economic development. Unfortunately, at the same time they very quickly absorbed the lesson that in trade remedy investigations the government of the importing country is both judge and jury. This discovery inevitably led to proliferation. At the end of 2024 there were 400 anti-dumping investigations ongoing, and 1,998 measures in force, with India the biggest user, reporting only 6 new investigations in 1995, which had increased to 81 in 2024.

Nevertheless, the U.S. still insists on the sanctity of its – rarely justified – technique of ‘zeroing’ in order to be able to inflate dumping margins. It is not clear why other, similar dark arts might not be employed to reach the desired result. Despite the evident grey areas in the anti-dumping agreement, the U.S. is simply outraged that the Appellate Body had the temerity to bring its longstanding technique into question.

National Security – A Free Pass?

More broadly, the U.S. also insists that trade measures taken on grounds of national security are entirely self-judging and not justiciable in the WTO. It has invoked national security on numerous occasions, some at least of which are questionable, to justify unilateral trade measures. Effectively, the U.S. interpretation of the WTO’s national security exception if applied generally would provide a free pass on all WTO disciplines to all members and negate the very purpose of having any trading system at all.

The WTO and China

On state capitalism, the consensus in Washington seems to be that China is vying with the U.S. for global economic domination, an unforeseen development which can only be explained through the accusation of ‘cheating’. The WTO is at fault for waving China in and then standing by ineffectually. This overlooks some important historical facts and context.

The WTO accession process is in fact highly asymmetric in its dynamics and very tough on the acceding country. There are virtually no objective benchmarks. Rather, the applicant has to satisfy all existing members, any one of whom can block progress, in bilateral market access negotiations as well as in a collective working party process. In the case of China, this took fifteen years during which there were numerous outbursts, highly charged meetings, stand-offs and some walk-outs. It was a painstaking and painful process.

It’s also worth remembering that, before China became a WTO member, the Jackson-Vanik amendment to the Trade Act of 1974 denied MFN status to certain countries with non-market economies that restricted emigration. However, the president had authority to grant an annual waiver. Congress could vote to reject the annual extension, but this was in turn subject to a presidential veto. In practice, in the 1990s presidents granted successive annual MFN extensions, including on two occasions exercising the veto. This had nothing to do with the WTO but illustrates the general orientation of U.S. economic interests at the time.

Despite all this, some critics in the west blame the WTO for a failure to address problems caused by China’s allegedly unfair trade practices, and for its inability to convert China into a market economy as envisioned when China joined.

As Mavroidis and Sapir noted in their 2021 book on China and the WTO, the GATT/WTO system is based on a “liberal understanding” but this is not translated into explicit, contractual language. They also remind us that the GATT accommodated a number of non-market economies.

It is not for “the WTO” to police international trade – that would be highly anathema to the U.S. amongst others – but the members individually and collectively have to assume that responsibility. While WTO agreements may not have been designed with the current situation in mind and have their shortcomings, they generally still provide a relevant basis for further action. Why has the U.S. not persevered with this avenue?

Decisions, Decisions…

Decision-making is another major WTO reform topic. Here, the consensus principle is as seen being primarily responsible for the glacial pace of events. It can and does lead to tactical hostage-taking – countries blocking a decision on one issue in which they have no real commercial stake in order to further their cause in another issue of more pressing concern.

In the WTO, consensus is defined as the absence of formal objection to a proposed decision by any member present at a meeting. In theory this gives each and every member a veto. But this is not the reality. A small developing country, or even a small group of such countries, will be unable to hold out against the combined pressure of the rest of the membership.

The consensus rule is particularly favoured by the large single-entity members who only have one vote each but are prepared – and able – to block consensus for as long as needed.

The U.S. seems to relish its veto power, as if validating its belief that only it knows the true way. For example, it has at the latest count single-handedly blocked the process to start the process of appointment of new Appellate Body members 88 times, even when no fewer than 130 other members have lined up on the opposite side.

The U.S. however is not the only one to be able to block consensus. To be fair, it usually has a substantive reason for doing so, whereas others may not.

It’s been suggested that the WTO might have a UN-style “security council” in order to streamline decision-making but this overlooks the fact that the biggest economies already have their veto. The problems with an institutionalised security council are well known.

Another suggestion is that the WTO might have an executive committee like some other international organisations. The GATT had in fact already experimented with a “Consultative Group of Eighteen” (with the Director-General in the chair) in the 1980s. Dissatisfaction was continually expressed over the composition of the group which had to be expanded to 22 with 9 alternates, but this still did not satisfy critics. Together with work pressure due to the Uruguay Round, this led to suspension of its work and it was never revived. WTO members still seem to be strongly attached to an open and inclusive method of operation.

In that vein, the ‘green room’ style of informal limited consultations with a varying but representative cast of members in the DG’s conference room has attracted a good deal of opprobrium in recent years. Some of this may be justified but, if handled adroitly and with safeguards over transparency and consultation, the record shows that this process with the DG as an honest broker can produce results. It is unrealistic to expect that 166 members will organically produce agreement through an all-inclusive process at every step. There has to be space for leadership.

Consensus Still Rules, but Can Be Tweaked

As a matter of principle, consensus seems to be here to stay. Suggestions for “double majority” voting are unlikely to gain traction without major surgery (for example reconciling one vote each for the U.S., China and India with the combined 28 votes mustered by the EU). Trade-weighted voting has been suggested periodically but always rejected.

Given the real effect international trade can have on domestic politics and the economy, it’s inconceivable that a major nation should be required to adopt a trade measure or law it had opposed just because it lost a vote in Geneva. Consent is integral to the system.

Despite obvious and annoying drawbacks, a good argument can be made that the WTO system of governance does have its strengths, notably a flexibility and ability to respond in differing ways and in varying configurations to evolving circumstances. In part this is because it is not tied down to a fixed institutional model with a rigid structure. However, there is a price that has to be lived with in terms of efficiency.

Nevertheless, some adjustments would be useful. The “Sutherland Report” (2005) on the future of the WTO reaffirmed the consensus principle but suggested that, where one or a very small number of members were blocking a decision, they should at least be required to put on record the vital national interest at stake preventing them from joining a consensus. Thereby, frivolous or tactical blocking might be discouraged.

Another improvement might facilitate ‘variable geometry’ through better accommodating certain types of plurilateral agreements between subsets of members. At present a consensus is required to include any new plurilateral agreement in the WTO legal structure. There have been instances of consensus being blocked even when a proposed plurilateral agreement not only does not infringe the rights of non-participants but actually increases those rights. Such obdurate negativity must surely be addressed, perhaps through relaxing the consensus requirement in some limited circumstances and subject to appropriate safeguards.

Where Is This Headed?

The biggest unknown is clearly the attitude of the U.S. administration towards the WTO. Financial contributions have been paused pending a review. On the other hand, a nominee has been put forward for appointment as U.S. ambassador to the WTO, which may be a good sign.

The U.S. could withdraw from the WTO but it seems more likely that they would simply remain, in a passive mode. By doing so they could veto anything they regard as undesirable and limit any damage to their interests.

In Geneva, the rest of the membership seems interested in WTO reform – some talk about “deep reform” – as the focus for the March 2026 Ministerial Conference. There are clear limitations however: there is for example no expectation that the Appellate Body will be revived. More likely the Ministerial Conference could define a limited reform agenda for subsequent negotiation. How much active support there will be from capitals remains to be tested.

The WTO will do well if it can hold the line and prevent further serious erosion of the system over the coming years. Beyond that, it is not beyond the bounds of possibility that governments and business, tiring of the incessant uncertainty and unpredictability, will think that they need something like a world trade organisation… and discover that they already have one.