The WTO in 2025: Between Crisis and Crucial Continuity

The World Trade Organization (WTO), created in 1995 under the Marrakesh Agreement, now boasts 166 members, covering over 98% of global trade and GDP AP News+5Reuters+5The Economic Times+5Wikipedia. Its founding pillars include administering trade treaties, resolving disputes, monitoring national policies, and supporting developing countries.

Yet today, it confronts an urgent crisis: a stalled dispute system, reform paralysis, and rising fragmentation as power blocs reshape global commerce.

1. A Crippled Dispute Settlement Mechanism

Once the WTO’s trademark strength, its Appellate Body (AB) has been non-operational since December 2019 due to U.S. obstruction of appointments, based on concerns over sovereignty and judicial activism Financial TimesWikipedia+4Wikipedia+4CSIS+4.

As a result, 32 appeal cases now languish “in the void”, unable to reach binding outcomes Wikipedia+1WTO+1. In response, 27 members, including the EU and China, have joined the Multiparty Interim Appeal Arbitration Arrangement (MPIA)—a voluntary stop-gap allowing some disputes to be settled, but only among participating members and without WTO enforcement powers WTO+15Wikipedia+15Wikipedia+15.

Reform efforts continue in 2025 but remain stalled, facing ideological divides and U.S. resistance WTO+15insidetrade.com+15AP News+15.

2. Trade Forecasts Darkened by Policy Friction

In April 2025, the WTO downgraded its forecast for merchandise trade, expecting a –0.2% contraction, down from earlier projections of +2.9% for 2025. This shift results from enacted reciprocal tariffs and rising trade policy uncertainty (TPU), which together shave off up to 1.5 percentage points from trade volume growth WTO+4WTO+4Hinrich Foundation+4.

Commercial services trade is projected to grow at just 4.0% in 2025 (down from 6.8% in 2024), further dampened by spillovers from merchandise trade weakness ReutersHinrich Foundation.

WTO Chief Economist Ralph Ossa warns that the coming policy decisions will determine whether the world embraces global trade or succumbs to fragmentation—and notes that so far, deglobalization has not fully materialized World Economic Forum.

3. Political Fractures in Reform Agenda

Reform ambitions—such as the Investment Facilitation for Development (IFD) agreement—have foundered on consensus rules. In July 2025, India, South Africa, and Turkey blocked what would have aided foreign direct investment in developing economies, highlighting how any one member can derail progress Wikipedia+12Reuters+12WTO+12.

Similarly, proposals to overhaul the consensus-based decision-making structure itself remain politically infeasible—yet essential to prevent future stagnation.

4. Why the WTO Still Matters

Despite its dysfunction, the WTO remains vital—particularly in rising protectionist and geopolitical clashes:

• DG Ngozi Okonjo‑Iweala warns that U.S. unilateral tariff moves underline the value of the WTO’s “most‑favoured‑nation” principle. Some 74% of global goods trade still operates under WTO rules, only marginally below pre-2018 levels ReutersFinancial Times+1AP News+1Axios+5Financial Times+5Wikipedia+5.

• A recent ruling via the MPIA reversed parts of an earlier WTO panel’s decision in an EU-China 3G/4G/5G IP dispute, reinforcing the utility of alternative mechanisms while the AB remains shuttered Reuters+1Wikipedia+1.

• As trade blocs splinter—U.S.–China decoupling, regional alliances like CPTPP, and EU strategic realignment—the WTO offers a shared legal framework that smaller nations still find attractive Financial Times+1Wikipedia+1.

  
  

5. What the WTO Should Do Next

✅ Restore Dispute Authority

Reconstituting a functioning Appellate Body—or acceptable alternatives—quickly is essential to lend credibility to rulings and deter unilateral trade actions.

✅ Update Trade Rulebook

New regulations are needed on digital flows, AI, carbon border adjustments, green subsidies, and industrial policy incentives, reflecting the priorities of the 21st century.

✅ Enable Flexible, Plurilateral Coalitions

In light of reform gridlock, the WTO should be a platform for coalition-based agreements on niche topics—digitally delivered services, environmental goods, etc.—which can later be expanded to full membership.

✅ Support Developing Economies

Greater technical assistance and reform capacity-building can prevent developing countries from being sidelined or caught between competing power blocs.

6. Geoeconomic Realities and WTO’s Strategic Niche

Major geopolitical shifts are redrawing trade lines:

• The U.S. continues to deploy reciprocal tariffs and friend-shoring policies, undermining multilateral norms.

• The EU moves ahead with its Carbon Border Adjustment Mechanism and strategic autonomy strategy.

• Rising powers like India and Southeast Asia advance trade alignment outside the WTO. Economists forecast growing trade flows that bypass the U.S.–China dynamic Reuters+6Wikipedia+6CSIS+6Hinrich FoundationBCG Global.

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Amid these disruptions, the WTO offers an institutional anchor—capable of mediating economic competition, preserving transparency, and supporting rule-based interaction where chaos threatens.

🧭 Conclusion: From Backbone to Stabilizer

The WTO is no longer the unchallenged backbone of global trade, but in an era of geoeconomic fragmentation, its role as a rule-based stabilizer is more important than ever. Though deeply imperfect, it’s among the few remaining multilateral institutions capable of holding trade disputes together—even as regional blocs, bilateral deals, and unilateral tariffs proliferate.

To remain credible, it must evolve—reviving enforcement, updating its rulebook, and accommodating flexible reform. Only then can it transition from being a relic of globalization to a mediator in a strategic, volatile trade landscape.