The World Trade Organisation was created to anchor global commerce in rules rather than power. Nearly three decades later, that promise is under strain. The clearest symptom is the paralysis of its dispute settlement system after the United States blocked appointments to the Appellate Body. But the deeper concern is political. The world’s largest economy is now openly questioning principles that underpin the multilateral trading system.
This tension has resurfaced after Washington circulated a proposal on WTO reform that challenges foundational norms. At stake is not merely institutional housekeeping, but the future of rule-based trade itself. Is the WTO becoming obsolete, or is it being pushed aside by the very powers that once championed it?
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The WTO’s stalled promise
Established in 1995, the World Trade Organisation sought to bring predictability to trade in goods, services, and intellectual property. With 166 members accounting for roughly 98% of global trade, its reach remains unmatched. Yet outcomes have fallen short of ambition. Multilateral negotiations have stalled for years, and enforcement has weakened.
Part of the problem lies in a structural shift the WTO was never designed to manage. China’s rise as a major trading power operating through a state-led economic model has strained rules written for largely market-based systems. Existing disciplines have struggled to address industrial subsidies, the role of state-owned enterprises, and opaque forms of state support that shape global competition. This is not only a US grievance. Export-oriented economies across Europe and Asia share concerns over transparency and competitive neutrality. Reform, therefore, is not just about preserving multilateralism, but adapting it to economic realities that did not exist in 1995.
What still works—and why it matters
Writing off the WTO would still be a mistake. It continues to provide a common legal framework governing tariffs, subsidies, and technical standards. Its transparency and peer-review mechanisms discipline national trade policies in ways no bilateral agreement can replicate. Even as enforcement weakens, governments continue to benchmark domestic measures against WTO rules.
The deeper problem is political compliance. Rules remain on the books, but major economies are increasingly unwilling to be bound by them when domestic priorities intrude. This erosion of commitment, rather than institutional design flaws, explains much of the WTO’s current malaise.
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Challenging the core principles
The US reform paper questions several cornerstones of the system: the most-favoured-nation obligation, special and differential treatment for developing countries, consensus-based decision-making, and even the role of the Secretariat. These are not procedural details. They define the logic of multilateralism itself.
Reopening them risks turning reform into a renegotiation of the social contract underpinning global trade. That prospect unsettles many developing economies, which rely on common rules to offset disparities in economic power and negotiating leverage.
MFN under pressure
The most contentious proposal concerns the MFN principle, which requires members to extend any trade concession granted to one country to all others. Washington argues that MFN no longer reflects economic realities in a world of divergent political systems and state-led models. In practice, MFN has already been weakened by tariffs imposed under national-security exemptions.
For countries such as India, MFN is not an abstract ideal. It is a safeguard against discriminatory treatment by larger economies. Weakening it would tilt the system away from rules toward bargaining power, leaving smaller players exposed to unilateral pressure. If exceptions become routine rather than exceptional, the WTO risks sliding into irrelevance not because its rules are outdated, but because they are ignored.
Trade policy is now being reshaped by climate action as well. Carbon border adjustment mechanisms, green subsidies, and local-content requirements tied to clean energy are proliferating across major economies. These measures blur the line between environmental objectives and protectionism. Without agreed multilateral guardrails, climate-linked trade actions risk becoming a new source of friction and retaliation. The WTO’s inability to reconcile climate imperatives with non-discrimination principles is emerging as a critical test of its relevance in a decarbonising world.
The battle over development status
Special and differential treatment is another flashpoint. The United States maintains that SDT should be limited to least-developed countries and not apply automatically to large emerging economies. There is merit in the argument that development is not static and that flexibilities should evolve.
But development gaps are not defined by aggregate GDP alone. They reflect institutional capacity, technological depth, and historical disadvantage. A blanket rollback of SDT would lock in existing asymmetries rather than correct them. It would also ignore the fact that many developing countries continue to face binding constraints in using trade as a growth engine.
The reform debate has also paid insufficient attention to the WTO’s limited progress on digital trade. Cross-border data flows, e-commerce, and digitally delivered services now account for a growing share of global commerce. Yet WTO rules in this area remain fragmented and provisional. For economies with large services sectors, the absence of clear disciplines on data localisation, privacy standards, and market access constrains growth. The risk is that digital trade rules will be written through exclusive plurilateral deals, further marginalising the multilateral framework.
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WTO reform: Consensus versus fragmentation
Consensus-based decision-making has undeniably slowed progress and encouraged frustration. Plurilateral agreements among willing members are often presented as a pragmatic response. But flexibility has limits. If plurilateralism becomes the default, the WTO risks splintering into exclusive clubs dominated by powerful economies.
Developing countries are often portrayed as defensive players in this debate, clinging to past flexibilities. This understates their agency. Many have clear offensive interests in a functioning WTO: expanded services trade, labour mobility under Mode 4, meaningful reform of agricultural subsidies in advanced economies, and tighter disciplines on export restrictions. These issues remain unresolved not because they lack economic logic, but because power asymmetries persist. For these countries, multilateralism is not nostalgia. It is the only credible path to balance.
The WTO’s troubles reflect a broader geopolitical shift. Strategic rivalry, industrial policy, and supply-chain securitisation have overwhelmed cooperative instincts. Ironically, this makes agreed disciplines more necessary, not less. Without them, trade disputes will increasingly spill into political and strategic confrontation.
The WTO chapter is not closed. But reform will succeed only if major powers recommit to being bound by common rules, even when that is politically inconvenient. Reform should strengthen multilateral discipline, not legitimise unilateral discretion. Anything less would mark a retreat from rules to power.