WTO: Challenges and Opportunities

The World Trade Organization (WTO) is a multilateral organisation where countries meet to agree on trade rules, review trade policies, and settle trade disputes.

The WTO is the main institution regulating international trade with the aim of certainty and stability in trade relations and the promotion of its members’ economic growth and development.

In February 2024, ministers representing all WTO members came together at the 13th WTO Ministerial Conference in Abu Dhabi to take stock of recent negotiations and discussions. The agenda included WTO reform, fisheries subsidies, and agriculture.

The UK and the WTO

The UK is a founding member of the WTO and has, since Brexit, regained its independence to act in the organisation. This means it can determine its own specific obligations, engage in WTO bodies and groups, and represent itself in WTO disputes.

In the absence of free trade agreements, which are an exception allowed by the WTO to grant more favourable terms of trade to specific partners, the UK will trade under WTO rules. The UK will then abide by the WTO’s standards and agreed tariff rates.

What is the WTO?

The WTO was created in 1995 after a long negotiation to establish a multilateral trade organisation. Before the WTO, the General Agreement on Tariffs and Trade (GATT/47) regulated multilateral trade relations. The GATT/47 was intended to be a provisional agreement and not an organisation. Conversely, the WTO has both an institutional and a regulatory dimension. It encompasses different bodies and a secretariat headed by the WTO Director-General.

All the decisions in the WTO are taken by consensus of its membership. The WTO currently has 164 members, comprising countries at different levels of development.

WTO rules regulate different aspects of international trade, which are grouped into three main areas: goods, services, and intellectual property.

According to the principle of the ‘single undertaking’, all WTO members must accept all the WTO multilateral rules. Other principles include non-discrimination, ensuring all WTO members are equal, and transparency, making all information available to all members.

What are the WTO’s main challenges?

The WTO has faced many recent challenges related to changes in the global economy and geopolitical context. WTO members have not been able to agree on new rules on agricultural goods, highlighting the conflicting interests between developing and developed countries.

In 2016, the US began blocking appointments to the WTO Appellate Body, the third stage of the WTO dispute settlement system (DSS), arguing that it was overreaching its original mandate. Consequently, the Appellate Body is now inoperative and the DSS is impaired. WTO members are trying to agree on how to reform the mechanism.

Difficult trade relations between the two largest world economies and WTO members – the US and China – also puts a strain on the WTO. Unilateral trade measures, such as raising tariffs on iron and steel, threaten the multilateral trading system. This highlights that the WTO might need to be reformed to meet current concerns such as national security, environmental standards, and the impact of technology on trade.

What is the WTO’s role in international relations?

Despite the recent popularity of free trade agreements, a multilateral venue like the WTO still has a role in restraining protectionism (practices giving an “unfair trade advantage” to domestic industries). It also provides a forum for discussion and helps members cooperate over issues of public interest.

For example, the WTO has addressed epidemics like HIV/AIDS and the Covid-19 pandemic. By amending the WTO rules, members made it easier for developing and least-developed countries to access affordable medicine and vaccines. However, critics of the WTO response to the Covid-19 pandemic argue that WTO intellectual property rules could have been relaxed further. The Agreement on Fisheries Subsidies also shows how the WTO can help protect resources shared by all nations (“global commons”).

Given the WTO’s role in international trade, the 13th ministerial conference attempted, albeit not successfully, to find solutions for current challenges and offer a way ahead for multilateral trade negotiations. Members are still trying to improve rules on longstanding issues such as agriculture and fisheries. They also aim to find permanent solutions for the Appellate Body paralysis and to reform negotiations and deliberations in the WTO.

How does the WTO affect the UK’s trade and economic priorities?

The UK views a functioning WTO and a strengthened multilateral trading system as playing an important role in curbing protectionism and building resilient trade relations. This system would support the Government’s priorities (PDF) of boosting the UK’s exports and improving the international competitiveness of the British economy, as well as its interests in promoting digital trade, trade in services, and greener practices.