Defending the multilateral trading system: Survey findings on WTO reform

On 19 February, 2025, World Trade Organization Director-General Ngozi Okonjo-Iweala proposed an initiative to convene an independent panel of "eminent persons" to kickstart a reform process of the WTO.  

She brought this idea to a meeting of the WTO’s General Council that day, its ruling body of 166 member countries. The General Council, the highest decision-making body at an institution established to defend the global multilateral trading system, took no decision on the proposal.

The initiative remains in limbo.
 
Whether through an independent panel or otherwise, reforming the WTO is no longer a matter of choice.

The Foundation’s goal is to help defend the global multilateral trading system, as the WTO seeks assistance from supporters in the 30th year since its founding. The survey asked nine questions on the most critical elements of where the WTO should focus its reform process. Prior to launching the survey, the Hinrich Foundation consulted six global trade policy experts with experience in WTO processes and initiatives on the topics and framing of the survey questions.

The survey’s findings show an overwhelming proportion of respondents agreeing with the need for the urgent reform of the WTO and its governance.

WTO’s need for reform

Eighty-two percent of respondents agreed that the WTO needs reform. Across the five optional responses, 52% of respondents expressed strong agreement while 30% expressed moderate agreement. The rest, 19%, disagreed or were undecided.¹

Consensus as a decision-making system

We asked respondents how important they felt it was to reform the WTO’s practice of requiring full consensus among its 166 members in making trade rules. Article 9 of the WTO’s founding Marrakesh Agreement enshrines the practice of using consensus "followed under GATT" as a basis for WTO decisions.

More than 92% of our survey’s respondents agreed it was important to modernize the practice of consensus, with 57% saying it was extremely important. A combined 3.5% said it was unimportant while 4.2% were undecided.

Download additional survey findings

It should be noted that GATT, which was signed by 23 countries in 1947, never explicitly mentions the word "consensus." The interpretation of its rule-making methods brought up consensus as one among a menu of voting systems that could be used. Consensus merely became a practice there due to the far smaller number of members and their higher degree of like-minded collaboration at the time.

Nearly 80 years later, multilateral decision-making has changed. With 166 members at widely different levels of economic development, most of the survey respondents agree that consensus at the WTO now has become a recipe for gridlock and hinders progress on trade rule-making.

Legal recognition for plurilateral agreements

A key question is how the WTO can make and legally adopt new trade rules more efficiently than it does now. Asked whether the WTO must adopt flexible approaches to legalize trade rules reached by "plurilateral" subsets of its members, 85% of respondents said they agreed, comprising 45% who strongly agreed and 39% who moderately agreed.

The WTO’s founding Marrakesh Agreement provides for the adoption of plurilateral agreements into a section known as its Annex 4. Since its inception in 1995, the WTO has not added a single plurilateral agreement to Annex 4.

A handful of members, usually including India, Indonesia, and South Africa, often blocks the entry into Annex 4 of any plurilateral agreement. Unable to attain consensus, such deals on new areas of trade slide back into gridlock and set back the WTO’s relevance. That is the limbo in which the plurilaterally-agreed WTO deals on e-commerce and investment facilitation now stand.

Classifying developed and developing countries

The WTO currently does not have a system to classify its members as developed or developing economies. Instead, it lets its members decide that for themselves. Two-thirds of WTO members say they are developing economies, including the world’s second-largest and fifth-largest economies China and India. Others include South Africa, Indonesia, Qatar, and Singapore. Some economies designate themselves developed in some aspects of WTO negotiations and developing in others.² Along with the "developing" status comes a slew of trade privileges known as "special and differential treatment." Sharp differences now exist over whether such special and differential treatment has become entrenched as an immutable privilege for WTO members that designate themselves developing countries for that organization’s purposes.

Asked if the WTO should develop a clear set of criteria to itself classify members as developed or developing, 51% of respondents strongly agreed that it should; 30% moderately agreed; 8% couldn’t decide; while 11% disagreed.

The survey provided a comment box for respondents. A full list of comments received from respondents is annexed to this report, along with the full set of survey results.

"Why do several large trading nations other than OECD (Organisation for Economic Co-operation and Development) member states, most notably Brazil, China, India and South Africa, continue to designate themselves as ‘developing countries’ in the WTO?" one respondent wrote. "Moving quickly to revoke such status would increase political pressure for the US to get fully engaged in the WTO reform process."

Effective decision-making with large and rising membership

When asked if the WTO’s decision-making process was effective at managing the varying interests of its increasing and diverse membership, 41% said it was not effective while 32% said it was somewhat ineffective. A combined 27% either couldn’t decide or said it was effective to some extent.

Dispute settlement system

One of the greatest problems that besets the WTO is the loss of its dispute settlement system. Frustrated on many fronts by the institution’s failure to move China to change its trade practices, among other issues, successive US administrations on a bipartisan basis have gutted the WTO’s dispute settlement system. The current Trump administration’s imposition of "reciprocal" tariffs, which unilaterally imposed unequal tariffs on different trading partners, upended whatever was left of American commitment to the multilateral trading system.

The retreat from global trade rules is doing irreparable harm to the international rules-based order. Interim arbitration arrangements at the WTO have not grown much in popularity, a sign of hesitation among WTO members to invest too much in the system.

Some 42% of survey respondents said paralysis in the WTO’s dispute settlement system has a high impact on the WTO’s effectiveness. Another 37% said the impact was "high-to-medium." The rest, a combined 21%, indicated the impact ranged from low to medium.

The most-favoured-nation principle

There was a relatively greater degree of differentiation of opinions on a question addressing the WTO’s most favoured nation (MFN) principle.

This is not surprising. The MFN principle is widely regarded as the bedrock of the multilateral trading system. The MFN principle, which is set out as Article 1 of GATT, required GATT parties – now WTO members – to extend equal treatment to all its fellow members on market access for traded products.

The question of whether the "most favoured nation" principle remains inviolate, or whether it ought to be made more flexible to accommodate unprecedented realities, remains one of the most vexing aspects of WTO reform. Some smaller nations believe that the MFN principle is the only assurance they have that they won’t get elbowed out on trade deals by larger economies.

Yet versions of an existing plurilateral agreement on e-commerce, co-convened by Australia, Japan, and Singapore, already include a novel provision that allows for a more flexible approach to the MFN principle. In the agreement’s Article 34, the MFN principle remains obligatory but the article leaves some flexibility on its application. The motivation, according to Hinrich Foundation reports³, was to allow wiggle room in an era dominated by the realities of the US-China geopolitical contest.

A plurality of respondents, or 34%, said they moderately agreed that MFN should be updated as a principle, while 23% said they strongly agreed. Eighteen percent strongly disagreed; 11% moderately disagreed; and 15% couldn’t make up their minds.

Conclusion and proposals

The results from the Hinrich Foundation’s survey indicate that an overwhelming proportion of respondents believe the WTO must evolve.

Adaptation is key to survival. To be effective, the WTO’s role requires brokering an environment of trust between governments, exporters, and consumers around the world.

Some thinkers have proposed ways in which the reform process could begin:

• The WTO’s e-commerce plurilateral agreement, even as it continues to be blocked from Annex 4 by a handful of members, offers one template in which to frame and address otherwise sensitive questions in the WTO’s structure.
• New Zealand Prime Minister Christopher Luxon and others have suggested that non-WTO free trade agreements, such as the 12-member Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), could provide a fresh template in combination with the 27-member European Union. Together, these 39 economies, representing a wide swathe of global trade, could set out at least the shared vital underpinnings of a new multilateral order.
• Other proposals include a "double majority" voting system to approve new trade rules, with WTO decisions to be legally adopted once they are voted in by a majority of WTO members and/or members collectively representing a threshold percentage of world trade.
• And there remains, of course, Director-General Okonjo-Iweala’s apparently stillborn idea for a panel of eminent persons. The United States blocked the proposal at the General Council on 19 February.

The WTO is one of the greatest legacies of the postwar peace. It provides many important functions for the global economy and international relations, including often unsung support, historical value, data and analytical resources, and a record of precedents that underpin any rules-based order.

The challenges before the world trading system are manifest. They ask whether current rules suffice when they are constructed around increasingly outdated precepts. In a new world of complex global supply chains, world trade rules must keep up. All these are impossible to accomplish under the current WTO rule-making and dispute settlement system.

The WTO has reached a dead-end. With the rapid growth in the numbers and diversity of membership, the WTO must embrace flexibility in the way it makes decisions. Reform is essential for the survival of the multilateral trading order, and failure is not an option.

Download the article and additional survey findings as a PDF.

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[1] The percentages referenced in this report on the survey’s findings are rounded up and may not add up to 100%.
[2] https://www.hinrichfoundation.com/research/wp/wto/development-debate-at-the-wto-crisis
[3] https://www.hinrichfoundation.com/research/wp/wto/national-security-question-at-the-heart-of-the-wto-e-commerce-deal

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