The WTO stands at a "whatever it takes" moment

President Donald Trump’s 2 April announcement of "reciprocal" tariffs – his so-called "Liberation Day" – could deliver a fatal blow to the rules-based trading system that the World Trade Organization (WTO) is meant to uphold. Yet it would be unfair to suggest that Trump is bulldozing a well-functioning institution.

Decision-making paralysis 

A good place to start is the WTO’s decision-making process. Formally, all WTO members are deemed to be equal in rights and obligations. Each country gets one vote, regardless of its share of global trade. In practice, to avoid the political cost that a one-country-one-vote system might impose on large economies, decisions are taken by consensus. But, in today’s fractured geopolitical climate, reaching consensus is harder than ever.  

During the old days of the WTO’s predecessor General Agreement of Tariffs and Trade (GATT), consensus was often brokered through informal "Green Room" meetings – closed-door gatherings near the director-general’s office where key trade powers and a few other influential members hammered out deals. Disagreements could be intense, but the collegiate spirit usually prevailed, and decisions were later shepherded through the broader membership.  

Eventually, the backlash from excluded countries led to the abandonment of the Green Room approach. In its place the WTO adopted a more "democratic" but utterly dysfunctional practice: every member behaves now as if they have the "right" to block consensus. This plays directly into trade negotiators’ instincts -consensus blocking becomes just another tool in their horse-trading arsenal. With the collegial spirit of the past gone, and geopolitics turning zero-sum, this perceived "right" has become a recipe for paralysis.  

Who is driving the WTO?  

To make matters worse, ambassadors to the WTO are firmly wedded to the idea that the WTO is, and should remain, a "member-driven organization". This reassures them that WTO management and its Secretariat staff should never take independent initiatives. But while all intergovernmental organizations are ultimately driven by their member countries, what makes the WTO unique – and uniquely paralyzed – is the belief that only governments can propose initiatives. WTO management and the Secretariat staff are relegated to preparing reports – when, and only when, members agree to commission them.

The result? No one is at the wheel.  

In this vacuum, the practice of handcuffing the Secretariat and its director-general has exacerbated the WTO’s drift. And yet nothing in the WTO agreement – adopted in 1994 and which established the institution in 1995 – prevents Director-General Ngozi Okonjo-Iweala from tabling reform initiatives. The only barrier is the erroneous belief that "member-driven" means "management-silent". Unsurprisingly, Trump’s "Liberation Day" – which brazenly defies the WTO’s core principles of "national treatment" and "most favoured nation" (MFN) — was met with near-total silence from Geneva. The price of dysfunction is growing.  

Outdated practices and the "developing country" loophole 

Beyond leadership paralysis, several outdated WTO practices actively undermine its ability to adapt to changing trade realities. A glaring example is the treatment of "developing countries".

Roughly two-thirds of WTO’s 166 members self-declare as "developing" economies, which entitles them to "special and differential treatment" (S&DT). These provisions grant them longer timelines and less ambitious commitments – reasonable concessions for countries with limited fiscal capacity to cushion the disruptive effects of trade liberalization, such as an often initial surge in unemployment from uncompetitive industries and dislocated capital. Hence, giving poorer countries more time to introduce less ambitious tariff reductions could help their governments round up support for trade liberalization.

Ironically, at the International Monetary Fund (IMF), the opposite dynamic prevails. Large EMEs rightly claim to have outgrown their quotas but developed countries – "advanced economies" in the IMF’s jargon – staunchly resist allowing EMEs to assume greater financial responsibilities by increasing their lending quotas - which determine a country's voting share - and weightage of governance of the multilateral financial institution.

The WTO’s inability to confront the absurdity stems, in part, from a structural flaw: it lacks an independent watchdog. Bretton Woods institutions and regional development banks have built-in accountability mechanisms. The WTO does not. Admittedly, paying to be criticized is never appealing. Yet failure to address festering problems invites crisis. Trump’s "Liberation Day" has brought that moment of reckoning.  

The China challenge 

Of course, as mentioned before, beyond dysfunctional working practices, the WTO has other problems that are harder to resolve. Perhaps the most intractable is how to reconcile WTO members’ rights to shape corporate governance with the system’s foundational assumption: that trade is driven by private actors seeking profit, not political goals.

Dispute settlement: A secondary priority?

No revival of the WTO can be complete without restoring its dispute settlement function. The US blocked appointments to the Appellate Body since 2016, citing concerns that long predate the first Trump administration. Chief among them is the US perception that the Appellate Body engaged in judicial outreach, unjustifiably filling in gaps left by ambiguous negotiating language.  

The Appellate Body often had to navigate the "constructive ambiguity" used by negotiators to paper over disagreements. In trying to resolve disputes, it narrowed possible interpretations to a single one – often far removed from what US negotiators had agreed on.  

This is a tough nut to crack, and one that should only be addressed after there is agreement on how to update and reform some of the other substantive disagreements on WTO governance. There is little point in debating how to interpret outdated or disputed rules before agreeing on what those rules should be.  

Where to start the reform walk?  

Rebuilding confidence in the WTO begins with dismantling the dysfunctional practices that have blocked and continue to block progress. A good first step would be rethinking the flawed interpretation of consensus as requiring unanimous support for any proposal seeking WTO approval.  

One option could be establishing a double majority rule to ascertain "consensus". For instance, initiatives supported by at least 65% of WTO members representing 75% of world trade could be deemed as consensual.  

Conclusion: A "whatever it takes" moment 

On 26 July, 2012, Mario Draghi, then-President of the European Central Bank, successfully quelled a financial crisis by declaring, "The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough". Such was the strength of Draghi’s credibility and actions that his words became a self-fulfilling prophecy. 

The WTO is at a "whatever it takes" moment. Management must step up. Countries that wish to preserve a cooperative trading environment – and avoid being forced to take sides in a fractured geoeconomic environment – must form a group of the like-minded and summon the courage to act. 

If they don’t, a chaotic deals-based disorder will quickly replace the remnants of an already-eroding, dysfunctional rules-based system.

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