Why the WTO Has Been Caught in Trade-War Crossfire

After a quarter century serving as the global arbiter of commerce, the World Trade Organization is facing an existential moment in an era of rising protectionism. The U.S. under President Donald Trump called for a fundamental reset at the institution and sabotaged its ability to settle disputes. A key U.S. goal at the WTO has been to challenge China’s state-led approach to trade and investment, an aim shared by President-elect Joe Biden. Acknowledging that the WTO has failed to adapt to shifts in the global trading system, some observers see an opportunity for reform. What’s unclear is whether the U.S. approach will result in the WTO’s reinvention or obsolescence.

The WTO, based in Geneva, provides a forum to negotiate deals, settle disputes and monitor trade practices. It started life in 1995, replacing the General Agreement on Tariffs and Trade, which was developed after World War II. While the GATT regulated trade in goods and reduced tariffs and other barriers, the WTO also covers services and intellectual property. A smoothly running WTO provides businesses with the certainty they need to invest and operate abroad, and fosters growth and economic integration. Since its creation, global trade has almost quadrupled in value. Yet, in recent years the WTO has fallen behind the massive shifts in the global economy, such as the proliferation of digital trade.