In October 2025, the United States paid back over US$25 million in overdue membership fees to the World Trade Organization (WTO), after withholding contributions for approximately eight months. In addition, the United States quietly removed the WTO from the list of multilateral organisations from which the United States would be withdrawing funding, as announced by the Trump administration in February 2025. While the repayment of debts signals a walking back of the Trump administration’s potential departure from the organisation, it is unclear whether this reflects a recalibration of WTO policy or just a temporary accommodation.
The WTO's upcoming 14th Ministerial Conference (MC14) will be held between 26-29 March in Yaoundé, Cameroon. As the WTO's highest decision-making body, it brings together trade ministers and senior officials from all 166 members every two years, providing an opportunity for the US Government to clarify its intentions around the WTO and, therefore, what its future may look like.
The origins of the WTO
Prior to the WTO’s establishment in 1995, the General Agreement on Tariffs and Trade (GATT) served as a key framework to govern international trade. Negotiated in the aftermath of the Second World War, the GATT was conceived as part of a broader effort to promote economic recovery through reducing trade barriers. At its inception, the GATT was made up of 23 member countries1 and created a set of rules to govern trade among these countries. However, the GATT lacked a formal institutional structure and enforcement capabilities, limiting its effectiveness in governing global trade.
To address these challenges, the Uruguay Round of trade negotiations was launched in 1986 with the aim of reforming the world trading system. Its conclusion led to the establishment of the WTO in 1995.
Different from the ad hoc nature of the GATT, the WTO is a permanent international organisation that covers not only trade in goods, but also services and intellectual property. WTO rulings are binding and enforceable through a formal dispute settlement mechanism, which was a significant departure from the GATT's more advisory approach. Since the creation of the WTO, membership has grown substantially, increasing from 112 members at its inception to 166 members today.
What economic impact has the World Trade Organization had?
The WTO’s overarching objective is to ensure that trade flows as “smoothly, predictably, and freely as possible.” What this means in action is that the WTO works to set and enforce ground rules for free trade, acts as a forum for trade dispute negotiations, and monitors existing country-specific legislation to ensure compliance with WTO standards.
The WTO is guided by two key foundational principles:
- The most-favoured-nation (MFN) principle: Under the MFN principle, countries cannot discriminate among trading partners. For example, if a WTO member country lowers a tariff on another member, it must lower tariffs on all. Some exceptions to this rule exist, including for regional trade agreements and preferential treatment for developing nations.
- The national treatment principle: This principle mandates that once foreign goods enter a member country’s market, the goods must be treated the same as domestic goods. Put simply, foreign goods cannot be discriminated against once they cross the border.
In line with its objective of ensuring free flows of trade, the WTO has successfully lowered tariff rates, which have contributed to global growth. The simple average MFN tariff rate fell 44%, from 13.2% in 1996 to 7.4% in 2021, meaning that overall tariff rates have decreased by almost half.2 In addition, the WTO’S 2024 World Trade Report found that trade cost reductions between 1995 and 2020 increased global real GDP by 6.8%, and 33% in low-income economies.
Furthermore, the WTO has facilitated a significant uptick in global trade. Since the beginning of the GATT, world trade volume has increased approximately 43 times (as of 2022) the level recorded in the early days, and world trade values have expanded more than fivefold since 1995. While the increase in world trade cannot be solely attributed to the WTO, its policies of trade liberalisation certainly played a significant role.
What challenges does the WTO face?
Despite advancements in tariff reduction and the facilitation of global trade, the WTO faces a series of interconnected challenges that threaten its legitimacy and long-term viability. Members have struggled to pass legislation to keep pace with modern trade, its dispute settlement mechanism has been rendered non-functional and repeated non-compliance by members has eroded its authority. Major powers are not the only ones undermining WTO rules; countries including India and Indonesia have also undermined WTO principles through subsidies, trade restrictions and non-compliance with rulings.
Key challenges expressed by members include:
1. Inability to pass legislation on critical issues
Since its inception, the WTO has struggled to pass new legislation, leading the organisation to suffer from critiques of an ‘outdated mandate’. The WTO operates on a consensus rule, requiring that all members agree on major decisions. Consensus is only reached if no member formally objects to a decision. As a result, legislation can be extremely difficult to pass. Since the WTO's founding, trade has evolved beyond the physical exchange of goods to encompass digital commerce and services, yet the organisation has struggled to update its legislation accordingly.
Since the WTO's founding, trade has evolved beyond the physical exchange of goods to encompass digital commerce and services, yet the organisation has struggled to update its legislation accordingly.
In 2001, the WTO met for the Doha Development Round aimed at reducing trade barriers globally, particularly in favour of developing countries’ priorities, including topics such as agriculture, services and intellectual property. Agriculture proved to be an irreconcilable difference, with developing countries seeking cuts to farm subsidies provided by developed countries and developed countries refusing to deliver cuts at the scale required. This impasse ultimately resulted in the failure of promised reforms and left a mark on the WTO’s ability to keep up with modern terms of trade.
The WTO’s modernisation challenge extends beyond Doha, with the rise of digital trade, data flows and e-commerce. With members unable to reach consensus on these issues, some countries have turned to plurilateral negotiations, such as the Joint Statement Initiative on E-Commerce, launched in 2017, which is a group aimed at establishing a common set of rules across trade-related areas of e-commerce.3 While these negotiations represent a potential workaround to the consensus challenge, they fall short of the universality principle that is integral to the founding of the WTO and threaten to create a bifurcated system where some rules apply only to some countries.
2. A non-functioning Appellate Body
A core component of the WTO is the dispute settlement mechanism, sometimes called the ‘crown jewel’ of the international rules-based system. The mechanism provides the WTO with a legally binding process through which members can challenge and enforce compliance with WTO rules. In its current state, however, the dispute settlement mechanism is rendered useless. As of March 2026, the Appellate Body has no members, meaning that it cannot hear and adjudicate on appeals.
Since 2011, the United States has played a significant role in crippling the Appellate Body’s ability to function. In 2011, the Obama administration blocked the reappointment of Appellate Judge Jennifer Hillman, claiming that US interests were not being protected. This decision was reportedly due to decisions that constrained the ability of the United States to impose protectionist measures. In 2016, the Obama administration went on to block the reappointment of South Korean Appellate Judge Seung Wha Chang to the Appellate Body, citing concerns that Chang’s decisions in his first term exceeded the mandate of the Appellate Body.4 The Trump administration intensified this stance beginning in 2017, using the consensus-based appointment process to systematically block the renewal of every Appellate Body member upon the expiry of their terms, leaving the body today with no sitting members.5
In response to this challenge, the European Union and a subset of other WTO members set up the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). Any member can join the MPIA by notifying the Dispute Settlement Body.6 In practice, the MPIA is a political agreement and must be individually invoked in each case between MPIA parties, meaning that both parties must consent to its use. Therefore, if one declines, there is no recourse for the other party to move forward with prosecution.
Without the existence of an enforceable dispute settlement mechanism, the WTO is reduced to a negotiating forum. Significant reform is needed to restore the enforcement arm of the WTO.
3. The China challenge
The WTO faces a unique challenge in the form of legislating China’s state-led economy model, prompting questions about its ability to meet the modern-day needs of global trade.
On 11 November 2001, China’s accession to the WTO was unanimously approved, with Mike Moore, the WTO Director General at the time, calling the moment “one of the most significant events of the 21st century for China, the WTO, and the world.” Members at the time, notably the United States, believed that China’s entry to the WTO would usher in a new era of open market economy and political reform. The Clinton administration championed China's accession on two beliefs — that WTO membership would gradually displace Communist Party control by forcing China to adopt market-based rules, and that binding China to international institutions was preferable to leaving it unconstrained outside them.
The WTO faces a unique challenge in the form of legislating China’s state-led economy model, prompting questions about its ability to meet the modern-day needs of global trade.
A set of special provisions were negotiated to allow China to enter the WTO because of the size and state-directed nature of its economy. China was designated a non-market economy for anti-dumping purposes, which allowed WTO members to use alternative, higher anti-dumping duties on Chinese goods. This designation was expected to expire in 2016, but the United States and the European Union have continued to apply it. Members also retained a China-specific safeguard clause, making it easier to impose emergency tariffs whenever a surge in Chinese imports threatened to disrupt their markets.
While China did undertake serious reforms, such as substantial tariff reductions and dismantling most non-tariff barriers, to meet WTO standards when it first joined, it has maintained a form of state-directed economy, with characteristics that present challenges to the function of the World Trade Organization.7 Criticisms of China’s economic practices include market distortion, currency manipulation and forced technology transfer. These complaints have resulted in 53 disputes being brought against China in the WTO on cases such as China’s intellectual property licensing, restrictions on rare earth exports, and anti-dumping and countervailing duties.8 Of these disputes, the European Union and the United States make up the bulk of the complainants.
In several cases, key aspects of the Chinese economy are seen to be in violation of the ideals of the WTO; however, not in clear violation of the rules, causing tension among members around unfair trade conditions. For example, China has been accused of deliberately undervaluing the renminbi (China’s official currency) to make exports cheaper and thus more competitive. However, despite the significant trade distortions, because currency policy falls outside the WTO's jurisdiction, affected trading partners have no formal mechanism to bring a challenge.
Countries have raised concerns about the WTO’s inability to suitably regulate China’s state-led development model, including the unclear boundaries between the state and firm for state-owned enterprises (SOEs).9 This is particularly evident in the governance of subsidies, as financial support provided by state-owned enterprises falls outside the WTO's definition of a subsidy, making it difficult to challenge through formal dispute proceedings.10 In addition, other concerns include China’s activity around intellectual property. This includes forced technology transfer as a condition of market access, which is explicitly against WTO rules but oftentimes hard to prove. Several reforms have been proposed to address these issues, such as stronger rules on industrial subsidies that explicitly cover SOEs and state-directed financing, as well as calls for expanded transparency obligations for SOEs. Neither of these proposals have been implemented.
4. The US challenge
The WTO faces another major power challenge from the United States. Despite being a founding member, the United States has taken actions that have undermined the ability of the WTO to function to its full capacity, with President Trump even threatening to withdraw from the organisation during the 2016 presidential election. As outlined above, the United States has played a significant role in crippling the Appellate Body.
Additionally, the Trump administration’s tariff actions have directly breached the United States’ substantive commitments to the WTO, violating bound tariff rates agreed under its membership. In 2018, Trump implemented steel and aluminium tariffs on the grounds of national security. WTO dispute settlement panels subsequently ruled against the United States for this use of tariffs. In response, the US Government stated “for over 70 years, the United States has held the clear and unequivocal position that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide range of threats to its security.” The United States maintained the tariffs (although some were softened under the subsequent Biden administration) and, in 2023, appealed to the already non-functioning WTO Appellate Body, effectively nullifying the ruling.11
“For over 70 years, the United States has held the clear and unequivocal position that issues of national security cannot be reviewed in WTO dispute settlement and the WTO has no authority to second-guess the ability of a WTO Member to respond to a wide range of threats to its security.”
More recently, the Trump administration’s 'Liberation Day' tariffs of April 2025 directly contradicted the MFN principle by applying varying tariff rates across countries. This pattern of selective compliance by a major power like the United States undermines the WTO's credibility and legitimacy.
Under the second Trump administration, the United States withheld funding from the WTO from March 2025 until October 2025. On 4 March 2025, a US delegate reported that 2024 and 2025 budgets were on hold pending a review of US support for international organisations. Based on a fees system proportionate to the share of global trade, the United States was due to contribute about 11% of the WTO annual budget (around US$25 million). In October 2025, the United States quietly repaid its dues. Despite repaying its debts, the US government’s actions still carry weight — if a member of the United States’ standing can withhold contributions without consequence, other members may reasonably question why they should be expected to meet their obligations.
What reforms have been proposed?
At the Munich Security Conference in February 2026, current WTO Director-General Dr Ngozi Okonjo-Iweala stated, "We may not like the action (US tariffs), but we must take the signal that we need to reform many of the things with the world trading system...The system is resilient, but it's not robust, so we need to make it robust by doing the necessary reforms."
WTO members have made several suggestions for reform, for example:
1. Reform the dispute settlement mechanism
With the United States currently blocking Appellate Body reappointments and a fully functioning dispute settlement mechanism, reform is urgently needed. To fix the immediate problem, more than 120 members have issued a joint call for the commencement of the selection process for new judges, which has been blocked by the United States.
Other proposals have been suggested, such as limiting the Appellate Body’s jurisdiction to address US complaints about judicial overreach.12 This proposal has been driven almost exclusively by the United States itself, with most other members instead seeking to restore and preserve the Body's full function.
In addition, there have been proposals to impose stricter timelines to speed up the notoriously slow-paced dispute system, with the settlement of trade disputes reported to take nearly twice as long as projected.13
2. Reform the consensus rule
WTO members have submitted proposals to move away from the strict consensus-based decision-making process. Even Director-General Okonjo-Iweala stated, "We need to reform some of the ways we do business like our consensus decision-making system, which is practised as unanimity — everyone has to agree — so it really slows down decision making." One suggested proposal is the introduction of a three-quarters supermajority to replace the unanimity principle.
3. Reform the ‘special and differential treatment’ status
Reform of the special and differential treatment provisions, which give developing countries special rights, has been proposed. In particular, proposals centre around the rule that permits countries to self-designate as developing nations. Around two-thirds of WTO members have claimed this status, which grants access to more favourable trade terms and reduced obligations. A key source of contention has been China’s self-designation as a developing country while at the same time being home to the second-largest economy in the world, calling into question the ability of countries to self-designate.14 The United States submitted a proposal in January 2019 calling for the exclusion of all OECD members, all G20 members and all members classified as high income by the World Bank from self-declaring as a developing country. A number of developing countries15 have argued against this, stating that self-declaration is a fundamental component of the WTO’s pillars of equality and fairness.
4. Improve transparency and notification compliance
A less contentious but practically significant reform concerns improving members' compliance with their obligation to notify the WTO of domestic subsidies and trade-related policies. Some members have raised concerns about low levels of compliance with notification requirements and have submitted proposals to improve compliance, such as calling for the Trade Policy Review Body to ensure that all reviews include an explicit focus on members’ compliance with notification obligations. Arguments against this reform point to capacity constraints preventing poorer members from fulfilling their full obligations.
5. Reform the scope of the WTO
In December 2025, the United States submitted several ideas for reform aimed at addressing what it sees as “severe and sustained imbalances.” This includes a proposal to end the MFN principle due to concerns of free-riding, wherein countries benefit from trade deals that they are not paying for, another to constrain the power of the WTO Secretariat to only administrative matters, and additionally suggested that issues outside the purview of the organisation, such as overcapacity and supply chain imbalances, be dealt with outside the WTO. There is no publicly available information on whether these proposals are being formally considered by the WTO.
What is Australia’s position on the WTO?
Australia remains a strong supporter of the WTO and has been a member since its founding. As acknowledged in the 2016 Defence White Paper, Australia’s security and prosperity are directly tied to the maintenance of a stable, rules-based order. As an economy reliant on trade, with 31% of Australia’s economic output supported by trade activity, namely goods exports, the WTO serves an important function in maintaining free and open trade conditions for Australia.
Australia has been an active and successful user of the WTO’s dispute settlement system. It has raised and won cases against the Korean meat import restrictions and Canadian wine measures. In addition, in response to China’s import restrictions on Australian goods, including wine and barley, Australia raised two cases on barley and wine in the WTO against China, ultimately dropping these cases after Beijing agreed to remove punitive tariffs. The dispute settlement mechanism largely benefits Australia as it allows Canberra to create more favourable trade conditions.
As an economy reliant on trade, with 31% of Australia’s economic output supported by trade activity, namely goods exports, the WTO serves an important function in maintaining free and open trade conditions for Australia.
Australia is in favour of WTO reform, as outlined in the 2025 WTO Trade Policy Review report. One of the review’s core priorities is reform of the dispute settlement mechanism. Australia currently participates in the MPIA alongside the European Union and others as an interim option to enforce members’ rights while seeking the full restoration of the Appellate Body. In addition, a key priority for Australia is to mitigate the agricultural subsidies that it sees as trade-distorting. Finally, Australia is a driver of modernisation initiatives, such as in its role of co-convenor of the E-commerce Joint Statement Initiative. Ultimately, Australia recognises that the survival of the WTO is in its economic interest and is driving reform.
Are there alternative frameworks?
There is no true alternative to the WTO as it exists as a multilateral organisation with the capability to enforce trade rules. However, in its current state, the WTO’s power is significantly constrained and may fall out of relevance without reforms. Therefore, countries are looking to other mechanisms to provide greater trade certainty in the global system.
One option is to further elevate regional trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). Regional trade agreements offer an option to uphold high standards of trade and cover other policy areas like investment and labour mobility. In particular, the CPTPP, of which Australia is a member, is considered the gold standard of free trade agreements. It aims to increase market access within the group and ambitiously reduce tariff barriers, offering another vehicle to shape the rules of trade on a minilateral scale. Regional trade agreements can also be more agile than larger trade groupings and update legislation on an expedited timeline. The drawback of greater reliance on regional trade agreements, however, is the creation of a ‘spaghetti bowl ’ of trade agreements in which there are overlapping rules and agreements that might contradict one another or cause duplication.
Another option is the potential creation of a new organisation to fulfil the function of the WTO. In June 2025, European Commission President Ursula von der Leyen and German Chancellor Friedrich Merz floated the idea of the European Union taking the lead in forming an alternative to the WTO. It has been suggested that some kind of grouping bringing together the CPTPP and the European Union could form the basis for this. In November 2025, the CPTPP and the European Union held the inaugural CPTPP-EU Trade and Investment Dialogue. Notably, however, this meeting reaffirmed both parties’ support for the WTO. It is unclear what a future organisation might look like; however, it is important to note that members are considering this route.
Conclusion
The WTO has been the cornerstone of the global economic order for more than three decades, providing the rules-based framework that underpins the vast majority of international commerce. However, the membership faces questions about the grouping’s ability to reform itself quickly enough to remain relevant in an environment radically different from the one for which it was formed. The proliferation of industrial policy, the growing use of non-tariff barriers and the invocation of national security exceptions by major economies represent a distinct challenge to the trading practices of the past. With MC 14 scheduled for 26–29 March, the coming weeks will offer a test of whether meaningful reform momentum can be generated. Attention should be paid to the actions of the United States to see if there is a sense of renewed commitment to the organisation following its repayment of dues.