Published 06 May 2025
Trump’s announcement of "reciprocal" tariffs is but the latest in a string of blows that have crippled the global trading system. Much of the problem facing the WTO lies with the organization itself. The principles behind the body's creation are noble and worthy, but their practical application has deadlocked negotiations, dispute resolution, and even the procedures of conducting meetings.
Much of the public attention on the WTO’s outwardly visible decline focuses on the gutting of its dispute settlement system when the US began blocking judicial appointments to its Appellate Body, after repeatedly accusing the WTO’s judicature of overreaching its mandate. But the root cause of the WTO’s increasing irrelevance comes down to its negotiating function that has for a long time been rendered largely impotent.
Striking deals among 166 economies of widely divergent stages of development was never going to be easy. Complicating things further is the fact that some countries, notably India and South Africa, seek to block any attempt to upgrade global trade rules. Some other members including Indonesia and China apply WTO rules only in circumstances that suit them. Meanwhile, the US, since the waning days of the Obama administration, has undermined everything from dispute settlement to plurilaterally-agreed rules for e-commerce to patent rules for vaccines.
Despite recent US actions which have gravely weakened the organization, neither the US nor any other of the 165 WTO member governments truly wish to see the WTO’s demise. The fact that Trump has nominated Joseph Barloon, an experienced and highly regarded trade attorney for the position of US ambassador to the WTO, provides further evidence that the US does not intend to leave the WTO just yet, as it has the World Health Organization and the Paris Accord.
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Apart from plurilateral agreements on information technology products, no negotiations on multilateral tariff reductions have been successful since the end of the Uruguay Round in 1994, when members agreed to set "bound" tariffs, or the maximum rate of duty any one country could charge. This was of great value to importers and exporters who could then set business plans around a transparent and reasonably stable price range.
Industrial countries implemented relatively low average duty ceilings on goods ranging from 3.4% to 6.6%. But because the economically advanced countries were less interested in opening consumer markets in emerging countries, there was less pressure applied at the time to India, Brazil, and Nigeria to reduce their tariffs. As a result, all three countries retained high tariffs, with India setting its average tariff ceiling for goods at 50.6% and for agriculture at 113.1%, Nigeria at 120.5% and 150%, and Brazil at 31.4% and 35.4%.
Trump has a point – though poorly communicated and often warped by politicization – when he argues that in some cases other countries charge higher tariffs on the US than the other way round. Reciprocity, supposedly another WTO principle, is not uniform when it comes to tariffs. But this is far from the full picture. Thanks in no small part to the WTO’s General Agreement on Trade in Services, the US is by far the world’s largest exporter of services at US$1.1 trillion in 2024, with a services trade surplus of US$293.4 billion.
Trump’s tariffs are roiling markets, but reverting to the same old playbook will not bring anyone the answers on how to respond to global trade systemic reform. One way in which the process could begin would be for the US to announce it is scrapping its existing WTO tariff schedule and seeks to renegotiate tariffs broadly with others. In this scenario, others would offer to open their own markets in return for the US, showing restraint or even forgoing its planned tariff hikes. This could be done under existing WTO rules, via the use of Article 28 of the General Agreement on Tariffs and Trade.
By narrowing the gap between developing and developed country tariffs, this process could also address the concerns of many developed countries – and some developing countries – that the concept of special and differential treatment has gone too far. But as promising as this approach might be, it is highly likely that it would need to be supplemented with other reforms if it is to result in real change in Geneva.
The need to reform most favored nation (MFN) has been taken up in one of the few successful negotiating fora in the WTO – the plurilateral negotiating group on e-commerce. The agreement this group struck addresses MFN through Article 34 of the deal’s “stabilized text”, which states that “This Agreement shall not apply as between any two Parties where either Party, at the time either Party accepts or accedes to this Agreement, does not consent to such application.” Inclusion of this non-application clause in future negotiations could make striking deals far easier and more politically palatable for WTO members in an age of geopolitical tensions.
National security exemption, or Article 21 in the WTO’s rulebook, is another intractable issue. The US has insisted that the organization has no jurisdiction over national security matters. Instead, Washington proposed that aggrieved members should seek compensation from the party invoking Article 21 for the volume of trade it believes has been impinged by the invocation. The case might then be settled through arbitration, a far less contentious process than going through a WTO dispute settlement panel. Many view the US offer as a compromise stacked in favor of the country, but it offers at least the possibility that compromise might be found.
In the brutal US trade measures unleashed in April, Trump has handed the WTO a chance to assert itself as a leader in restoring stability, predictability, and indeed reciprocity to the trading system. There are many issues about the organization waiting to be solved, but one must start somewhere. The time to press for this is now.
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Author
Keith M. Rockwell
Keith M. Rockwell is a Senior Research Fellow at the Hinrich Foundation. Prior to his retirement in June 2022, Keith served as a Director at the World Trade Organization (WTO) and spokesperson for the organization for more than 25 years. He also is Global Fellow at the Wilson Center.
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