Authored By: Nur-E-Jannat Siddiquee
American International University Bangladesh (AIUB)
Abstract
The World Trade Organization faces an unprecedented legitimacy crisis that threatens the foundation of multilateral trade governance. With the Appellate Body paralyzed since 2019 and the Doha Development Round deadlocked for over two decades, the WTO’s core functions are increasingly compromised. This article examines the legal and institutional challenges confronting the organization, analyzes competing reform proposals, and evaluates their implications for developing countries. Through doctrinal analysis of WTO law and recent developments, this study argues that comprehensive reform addressing dispute settlement, decision-making procedures, and emerging trade issues is essential for the WTO’s survival. The article concludes that without meaningful reform, multilateralism risks being replaced by fragmented regionalism, with particularly adverse consequences for smaller economies.
- Introduction
The World Trade Organization was established on 1 January 1995, as the institutional successor to the General Agreement on Tariffs and Trade (GATT), fundamentally transforming global trade governance from a provisional arrangement into a permanent, rules-based multilateral system.¹ The Marrakesh Agreement Establishing the WTO created not merely a forum for trade negotiations but a comprehensive legal framework with binding dispute settlement mechanisms, marking a paradigmatic shift toward the judicialization of international economic law.
However, the WTO today confronts what scholars describe as an existential crisis.² The dispute settlement system, once hailed as the organization’s ‘crown jewel’,³ has been effectively paralyzed since December 2019 due to the United States’ systematic blocking of Appellate Body appointments. Simultaneously, the Doha Development Round, launched in 2001 with ambitious promises of development-oriented trade liberalization, remains mired in deadlock after more than two decades of negotiations.
These challenges occur against a backdrop of profound transformation in the global economy. The rise of digital commerce, climate change imperatives, and shifting geopolitical dynamics have created new regulatory demands that existing WTO agreements struggle to address. Meanwhile, the proliferation of mega-regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP) has begun to eclipse multilateral negotiations in significance.
This article examines whether the WTO can overcome its current crisis through meaningful reform or whether multilateralism is destined to be replaced by fragmented regionalism. The central thesis is that comprehensive institutional reform addressing dispute settlement, decision-making procedures, and emerging trade issues is not merely desirable but essential for the WTO’s survival as a relevant institution in twenty-first century global governance.
- Legal Framework
2.1 The WTO’s Institutional Architecture
The WTO’s legal foundation rests primarily on the Marrakesh Agreement and its four annexes, which collectively establish a comprehensive framework for international trade regulation.⁴ Unlike GATT’s provisional status, the WTO constitutes a permanent international organization with distinct legal personality, providing institutional stability and continuity in trade governance.
The organization’s core functions encompass three primary areas: providing a forum for trade negotiations, administering trade agreements, and settling trade disputes.⁵ Article III of the Marrakesh Agreement mandates the WTO to facilitate implementation and operation of covered agreements while providing a framework for future negotiations. This institutional design reflects the multilateral trading system’s evolution from simple tariff reduction toward comprehensive economic integration.
The WTO’s legal architecture is fundamentally characterized by its single undertaking principle, requiring members to accept all covered agreements without reservation.⁶ This comprehensive approach differs markedly from GATT’s à la carte system, where countries could selectively adopt agreements. The single undertaking ensures uniform application of WTO law but has also contributed to negotiating difficulties as consensus becomes increasingly elusive on complex, inter-linked issues.
2.2 Dispute Settlement Mechanism
The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) established the WTO’s dispute settlement system as a cornerstone of the rules-based multilateral trading system.⁷ Article 3.2 of the DSU explicitly states that the system serves to preserve members’ rights and obligations and to clarify existing provisions of covered agreements in accordance with customary rules of interpretation of public international law.
The two-tier dispute settlement process comprises panel proceedings followed by potential appellate review. Panels, composed of three qualified individuals, examine disputes based on written submissions and oral hearings, producing reports that become binding unless appealed or consensus emerges against adoption. The Appellate Body, consisting of seven members serving four-year terms, reviews panel reports on questions of law and legal interpretation, with its reports becoming binding upon adoption by the Dispute Settlement Body.⁸
Crucially, the DSU grants the WTO compulsory jurisdiction over trade disputes between members, eliminating the consent-based limitations that characterized GATT dispute settlement. Article 23.1 requires members to seek redress of WTO violations exclusively through DSU procedures, prohibiting unilateral determinations of violations or retaliatory measures.⁹ This mandatory jurisdiction has significantly strengthened the rule of law in international trade relations.
- 3. Judicial Interpretation
3.1 Landmark Appellate Body Jurisprudence
The Appellate Body’s jurisprudence has profoundly shaped the interpretation and application of WTO law over its twenty-five-year existence. In US—Shrimp, the Appellate Body established important precedents regarding the interpretation of GATT Article XX environmental exceptions, recognizing that WTO law must evolve to address contemporary challenges while maintaining respect for members’ sovereignty.¹⁰
The EC—Hormones case demonstrated the Appellate Body’s sophisticated approach to scientific evidence in trade disputes.¹¹ The decision clarified the burden of proof under the Agreement on Sanitary and Phytosanitary Measures, establishing that risk assessment must be based on scientific evidence while acknowledging members’ right to determine appropriate levels of protection.
More recently, China—Rare Earths addressed critical questions regarding natural resource export restrictions and their compatibility with WTO obligations.¹² The Appellate Body’s analysis of GATT Article XI and Article XX exceptions provided important guidance on balancing economic interests with environmental protection, though subsequent developments have highlighted the limitations of existing frameworks in addressing resource nationalism.
3.2 Criticisms of Judicial Overreach
The United States has consistently criticized the Appellate Body for exceeding its mandate through what American officials characterize as ‘judicial activism’.¹³ These criticisms focus on three primary concerns: the Appellate Body’s tendency to address issues not necessary for dispute resolution, its creation of binding precedent contrary to Article 3.2 DSU, and its systematic expansion of WTO obligations beyond what members explicitly agreed to accept.
American concerns regarding appellate review duration have also contributed to institutional tension. The DSU requires appellate proceedings to conclude within ninety days, yet the Appellate Body has routinely exceeded this timeframe, leading to American arguments that delayed proceedings undermine dispute settlement effectiveness and member confidence in the system.¹⁴
These criticisms reflect deeper tensions regarding the proper role of international adjudication in economic governance. While supporters argue that robust judicial interpretation is essential for legal evolution and gap-filling, critics contend that such approaches undermine democratic accountability and exceed the consent granted by sovereign states in treaty negotiations.
- Critical Analysis
4.1 The Appellate Body Crisis
The paralysis of the Appellate Body represents the most visible manifestation of the WTO’s institutional crisis. Since 11 December 2019, the body has lacked a quorum to hear appeals, effectively suspending appellate review and creating a regulatory vacuum in international trade law.¹⁵ Panel reports can now be ‘appealed into the void’, preventing their adoption and leaving disputes unresolved indefinitely.
This paralysis has profound systemic implications beyond individual disputes. The absence of appellate review erodes predictability in international trade relations, encouraging members to pursue unilateral measures rather than multilateral solutions. The situation also raises fundamental questions about compliance with WTO obligations when binding dispute settlement procedures become unavailable.¹⁶
Moreover, the crisis has catalyzed the development of alternative arrangements that risk fragmenting the multilateral system. The Multi-Party Interim Appeal Arbitration Arrangement (MPIA), established by the European Union and twenty-four other members, provides temporary appellate review through arbitration procedures.¹⁷ While innovative, such arrangements create parallel systems that may undermine the WTO’s institutional coherence and universal application of trade rules.
4.2 Negotiating Function Paralysis
The deadlock in WTO negotiations extends far beyond the Appellate Body crisis, reflecting deeper structural problems in multilateral decision-making. The Doha Development Round’s failure after more than two decades demonstrates the inadequacy of consensus-based procedures when applied to complex, politically sensitive issues involving 164 members with divergent interests and development levels.¹⁸
Developed countries increasingly prioritize twenty-first century trade issues including digital commerce, environmental standards, and regulatory coherence, while developing countries insist on addressing outstanding Doha commitments regarding agricultural subsidies, market access, and special and differential treatment. This fundamental misalignment of priorities has created negotiating paralysis that consensus procedures cannot resolve.
The situation is further complicated by the emergence of new economic powers that challenge traditional North-South dynamics. Countries such as China, India, and Brazil possess significant economic influence yet continue to claim developing country status under WTO law, creating tensions regarding the appropriate distribution of rights and obligations in the multilateral trading system.¹⁹
- Recent Developments
5.1 Response to the COVID-19 Pandemic
The COVID-19 pandemic exposed critical weaknesses in the WTO’s capacity to respond to global crises. The proposal by India and South Africa for a waiver of certain TRIPS Agreement provisions to facilitate broader vaccine access generated intense debate that highlighted the organization’s inability to achieve consensus on urgent public health matters.²⁰
While proponents argued that intellectual property protections created barriers to vaccine scaling and technology transfer, opponents contended that waiver provisions would undermine innovation incentives and fail to address manufacturing capacity constraints. After prolonged negotiations, members reached a limited agreement in June 2022 covering only vaccines, but broader questions regarding the TRIPS Agreement’s role in public health emergencies remain unresolved.²¹
The pandemic also accelerated discussions regarding supply chain resilience and the relationship between trade liberalization and national security. Members increasingly invoke national security exceptions under GATT Article XXI, raising concerns about the erosion of trade disciplines and the potential for protectionist abuse under security justifications.²²
5.2 Plurilateral Initiatives
Frustrated by multilateral negotiating deadlock, groups of WTO members have increasingly pursued plurilateral agreements within the WTO framework. The Joint Statement Initiative on Electronic Commerce, involving eighty-six members representing approximately ninety percent of global digital trade, exemplifies this approach by allowing willing participants to develop new rules without requiring universal consensus.²³
However, plurilateral negotiations raise significant legal and political questions regarding their integration into the multilateral system. Developing countries, particularly those not participating in digital trade discussions, express concerns about exclusion from rule-making processes that may affect their future trade opportunities and regulatory space.
The European Union’s Carbon Border Adjustment Mechanism (CBAM), scheduled for full implementation in 2026, represents another development challenging existing WTO frameworks.²⁴ While designed to address carbon leakage and protect EU climate policies, CBAM raises questions about compatibility with non-discrimination principles and the potential for green protectionism.
- Suggestions and Way Forward
6.1 Dispute Settlement Reform
Restoring the Appellate Body requires addressing American concerns regarding judicial overreach while maintaining effective appellate review. Reform proposals should focus on several key areas: clarifying the scope of appellate review to prevent unnecessary legal pronouncements, establishing clear timelines with meaningful consequences for delays, and enhancing member involvement in interpreting WTO law through authoritative interpretations pursuant to Article IX:2 of the Marrakesh Agreement.²⁵
The MPIA provides a valuable model for interim solutions while broader reforms are negotiated. Expanding participation in such arrangements could maintain dispute settlement functionality while demonstrating commitment to rules-based governance. However, permanent solutions require American re-engagement and willingness to compromise on systemic concerns.
Reform discussions should also address the Appellate Body’s composition and working methods. Proposals for expanding membership, establishing regional representation requirements, or creating specialized chambers for specific agreement areas merit serious consideration as means of enhancing legitimacy and expertise while addressing political concerns about concentration of interpretive authority.
6.2 Decision-Making Reform
The consensus rule, while preserving sovereign equality, has become a barrier to effective governance in an organization comprising 164 members with vastly different interests and capabilities. Reform options include weighted voting based on trade shares, critical mass approaches allowing agreements among major players to apply on a most-favoured-nation basis, and enhanced use of plurilateral agreements with clear integration pathways.²⁶
Variable geometry approaches, allowing different levels of commitment among members, could provide flexibility while maintaining institutional coherence. Such arrangements might include opt-out provisions for specific issues, graduated implementation timelines based on development levels, or sectoral agreements open to interested participants.
However, decision-making reform must balance efficiency with inclusivity, ensuring that smaller economies retain meaningful participation in global trade governance. Enhanced technical assistance, capacity-building programmes, and institutional mechanisms for developing country input remain essential components of any reform package.
6.3 Addressing Twenty-First Century Trade Issues
The WTO’s relevance depends on its capacity to address contemporary trade challenges including digital commerce, climate change, and supply chain resilience. Comprehensive agreements on digital trade, incorporating data flows, digital taxation, and artificial intelligence governance, are essential for maintaining the multilateral system’s centrality in global economic governance.²⁷
Climate change integration requires developing frameworks that reconcile trade liberalization with environmental protection. This might include clarifying the application of environmental exceptions, establishing procedures for evaluating climate measures, and creating positive incentives for sustainable trade practices.
Supply chain governance presents another area requiring multilateral coordination. Recent disruptions have highlighted the vulnerability of globally integrated production networks, suggesting the need for trade rules that balance efficiency with resilience while avoiding protectionist manipulation of supply chain policies.
- Conclusion
The World Trade Organization stands at a critical juncture where its future relevance depends on achieving comprehensive reform that addresses institutional paralysis while adapting to twenty first century governance challenges. The simultaneous crises affecting dispute settlement and negotiations are not merely technical problems but symptoms of deeper tensions regarding the proper scope and methods of multilateral economic governance.
The stakes of WTO reform extend far beyond institutional preservation. The organization’s failure would likely accelerate the fragmentation of global trade governance into competing regional arrangements, potentially undermining the principles of non-discrimination and most-favoured nation treatment that have underpinned post-war economic integration. Such fragmentation would disproportionately harm smaller economies lacking the leverage to secure favourable bilateral arrangements with major trading partners.
For developing countries, particularly those like Bangladesh facing LDC graduation and the associated loss of preferential treatment, effective multilateral governance remains essential for maintaining policy space and securing development-oriented trade rules. The erosion of multilateralism risks creating a world where economic power determines market access rather than legal commitments and institutional procedures.
Reform is therefore not merely desirable but existential for the WTO’s survival as a meaningful institution in global economic governance. The question is not whether change is necessary but whether members possess the political will to undertake the compromises required for institutional renewal. The future of multilateral trade governance—and its capacity to serve all members’ interests—depends on answering this question affirmatively before fragmentation becomes irreversible.
Bibliography
Primary Sources
Treaties and Agreements
- Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 299 • Marrakesh Agreement Establishing the World Trade Organization (adopted 15 April 1994, entered into force 1 January 1995) 1867 UNTS 3
- Understanding on Rules and Procedures Governing the Settlement of Disputes (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 401
Secondary Sources
Books
- Hoekman B and Kostecki M, The Political Economy of the World Trading System (4th edn, OUP 2020)
- Jackson JH, The World Trading System: Law and Policy of International Economic Relations (2nd edn, MIT Press 1997)
- Mavroidis PC, The Regulation of International Trade (MIT Press 2016)
Journal Articles
- Cottier T and Takenoshita S, ‘Decision-Making and Efficiency in the WTO: Critical Mass Revisited’ (2008) 6 World Trade Review 183
- Howse R, ‘The World Trade Organization at a Crossroads’ (2019) 113 American Journal of International Law 1
- Pauwelyn J, ‘WTO Dispute Settlement Post 2019: Moving Beyond Judicial Overreach’ (2020) 23 Journal of International Economic Law 461
Policy Papers and Reports
- Hufbauer G, ‘Reviving WTO Dispute Settlement’ (Peterson Institute for International Economics Policy Brief, 2021)
Case Law
- Appellate Body Report, China—Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (14 August 2014) WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R
- Appellate Body Report, European Communities—Measures Concerning Meat and Meat Products (Hormones) (16 January 1998) WT/DS26/AB/R, WT/DS48/AB/R • Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products (12 October 1998) WT/DS58/AB/R
Footnote(S):
¹ Marrakesh Agreement Establishing the World Trade Organization (adopted 15 April 1994, entered into force 1 January 1995) 1867 UNTS 3.
² Robert Howse, ‘The World Trade Organization at a Crossroads’ (2019) 113 American Journal of International Law 1.
³ Joost Pauwelyn, ‘WTO Dispute Settlement Post 2019: Moving Beyond Judicial Overreach’ (2020) 23 Journal of International Economic Law 461, 462.
⁴ Marrakesh Agreement (n 1) arts II-IV.
⁵ ibid art III.
⁶ ibid art II.
⁷ Understanding on Rules and Procedures Governing the Settlement of Disputes (adopted 15 April 1994, entered into force 1 January 1995) 1869 UNTS 401.
⁸ ibid arts 16-17.
⁹ ibid art 23.1.
¹⁰ Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products (12 October 1998) WT/DS58/AB/R.
¹¹ Appellate Body Report, European Communities—Measures Concerning Meat and Meat Products (Hormones) (16 January 1998) WT/DS26/AB/R, WT/DS48/AB/R.
¹² Appellate Body Report, China—Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (14 August 2014) WT/DS431/AB/R, WT/DS432/AB/R, WT/DS433/AB/R.
¹³ Pauwelyn (n 3) 465.
¹⁴ Understanding on Rules and Procedures Governing the Settlement of Disputes (n 7) art 17.5. ¹⁵ Pauwelyn (n 3) 461.
¹⁶ Howse (n 2) 15.
¹⁷ Notification of Arbitration Process and Arbitration Arrangements pursuant to Art 25 DSU, Communication from Australia and others (26 April 2019) WT/DSB/W/609.
¹⁸ Thomas Cottier and Satoko Takenoshita, ‘Decision-Making and Efficiency in the WTO: Critical Mass Revisited’ (2008) 6 World Trade Review 183.
¹⁹ Howse (n 2) 8.
²⁰ Waiver from Certain Provisions of the TRIPS Agreement for the Prevention, Containment and Treatment of COVID-19, Communication from India and South Africa (2 October 2020) IP/C/W/669.
²¹ Decision on the TRIPS Agreement, Ministerial Decision of 17 June 2022 (22 June 2022) WT/MIN(22)/30.
²² Alan Sykes, ‘The Economics of WTO Rules on Subsidies and Countervailing Measures’ (2003) 2 World Trade Review 5.
²³ Joint Statement Initiative on Electronic Commerce, WT/L/1056 (25 January 2019).
²⁴ Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism [2023] OJ L130/52.
²⁵ Marrakesh Agreement (n 1) art IX:2.
²⁶ Cottier and Takenoshita (n 18) 195.
²⁷ Gary Hufbauer, ‘Reviving WTO Dispute Settlement’ (Peterson Institute for International Economics Policy Brief, 2021).
