March 1, 2024


Can the WTO stay relevant in today’s world?

(Image credit: WTO’s website)

In an increasingly complex multipolar world, several aspects of governance and policymaking can be tricky. None more so than international trade. The very act of providing goods to another country is subject to plenty of scrutiny. Geopolitical tensions have only complicated that process even more.

The World Trade Organization (WTO) is in charge of ensuring that trade between countries is fair for all parties involved. But it has been criticised for its policies and stances over the years. In some cases, from all sides. Does the WTO, as it stands, have relevance in today’s more complex world? Is it keeping up with the times?


The global rules that underpin the multilateral economic system were a direct reaction to World War II and a desire to never go through something like that again. Countries wanted some robust system that would govern world trade at the time. The result was the General Agreement on Tariffs and Trade (GATT) signed in 1947 by 153 countries. The basic purpose was to reduce tariffs and other trade barriers to ensure trade was mutually beneficial.

There were several rounds of talks over the years. The Uruguay Round happened in 1993. After seven years of negotiations, 117 countries agreed to reduce trade barriers and create more robust trade rules. Another result of this agreement was the WTO, formed on January 1, 1995.

The WTO has over 150 members and 31 observer governments. They represent about 95% of world trade. You could say the birth of the WTO was more of a continuation than something new being created.

The body that oversees the day-to-day operations is the General Council, consisting of a representative from each member country. It meets monthly and provides a forum for several trade issues. The Council also meets in two other capacities.

First is the Trade Policy Review Mechanism (TPRM). It’s to closely monitor the trade policies of members. The four countries with the largest shares of world trade are reviewed every two years, the next sixteen largest traders every four years, and others every six years. Second is the Dispute Settlement Body (DSB). If there’s a trade dispute between member countries, this is where things get hashed out.

In theory, WTO members get access to each other’s markets on even terms. It means no two countries can have trade pacts without granting the same terms to other countries in the WTO. Critics have argued that the WTO has become a place where politics have been forced into trade, resulting in long-term issues.

The general thesis of the WTO has always been for countries to open up and be less protectionist. While developed countries and economies are on board, the same can’t be said for developing ones. Developing countries often say their developed counterparts haven’t fully granted them the benefits promised under the Uruguay round of GATT. Some countries have even regretted including intellectual property under the WTO’s ambit.

In today’s times, with increased polarisation and geopolitical tensions, the WTO is in a precarious and tricky position. The global rules-based order is being challenged, with countries like China and India having increased influence. Can the WTO still be relevant?

VIEW: Still relevant and necessary

The common myths about the WTO range from it being a mistake by American diplomats to, at worst, a “globalist” conspiracy to dictate policy. There needs to be a world body that governs trade between countries. That original goal and mission of the WTO still stand true today, arguably more than ever. No one’s going to say the WTO is a perfect organisation and doesn’t have challenges.

It’s important to remember that the WTO isn’t necessarily a purely decision-making body. The rules, priorities, and activities are determined by its members. Some of the past work by the body bodes well for its future. In the aftermath of the 2008 financial crisis, trade-policy cooperation didn’t completely break down, unlike during the Great Depression. The WTO’s success in preventing trade wars outweighs any perceived failures.

The WTO is necessary since it oversees the implementation of past agreements. Its trade policy review procedures are probably the most important source of information on global trade. If the WTO were to disband, for example, the economic consequences could be dire. Arbitrary bilateral agreements would only result in trade diverting, i.e., the primary effect will just be a shift in a less rational direction. This could also result in trading blocs. Poorer countries whose interests are at least somewhat protected by the WTO won’t have much of a shield.

COUNTERVIEW: Needs an update or else…

166 trade ministers have gathered in Abu Dhabi for the latest Ministerial Conference (MC). While past conferences provided political pressure to resolve differences, this year things are different. A backlash to global trade, rapid technological advancements and fragmented trade and investment patterns have challenged the WTO’s functioning.

As the Global South has gained prominence, countries like India have a bigger say in global trade. This means the WTO needs to have better transparency in policy discussions. However, past attempts at infusing equity and transparency haven’t gone beyond rhetoric. Countries are increasingly moving toward bilateral trade agreements. They generate better and targeted market access and reduced tariffs. Why get entangled in the WTO’s messy and lengthy policy processes when two countries can just negotiate and shake hands?

Part of the reason why the WTO is in danger of being irrelevant is that it often fails in its most basic purpose – observe and implement trade rules and settle disputes through consensus. Countries like China and the US, two of the biggest trading nations, are often at odds. Developed countries, on the other hand, are left to fend for themselves. The WTO also hasn’t managed to provide answers on two pressing issues that affect trade – climate change and new-age technology like AI. Given how long and tedious WTO policy negotiations are, the prospects don’t look good.

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What is your opinion on this?
(Only subscribers can participate in polls)

a) The WTO is still relevant in today’s world.

b) The WTO is losing relevance in today’s world.


For the Right:

Vande Bharat and the treatment of its service providers

For the Left:

Kerala must prioritise a gender policy audit