Over the last few years, many countries have called into question the effectiveness of the World Trade Organization (WTO) when it comes to resolving disputes between nations. While members continue to refer grievances to the body, there is widespread recognition that its processes are not functioning as intended.
Last month, therefore, EU leaders appeared to suggest reforming or even replacing the body. A proposed partnership between the 27-nation bloc and the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) highlighted as a starting point for new international trade governance.
So what are the challenges currently being faced, what could reform look like and what issues may lie ahead when it comes to transforming world trade?
The issues facing the WTO in 2025
The biggest complaints against the WTO revolve around the paralysis of its binding Appellate Body, the top level for resolving international trade disputes. This has been stymied for several years, primarily due to the refusal of the US to sign off on the appointment of new judges to the body.
As a result, when rulings on trade disputes are appealed, there is no working mechanism to reach a final decision. As a result, many large-scale issues remain outstanding, with open cases including disputes between the EU and Indonesia related to nickel ore exports, rulings on subsidies for aircraft manufacturers Boeing and Airbus and anti-dumping cases brought by several countries against China.
Other criticisms of the WTO include an outdated rulebook that does not reflect the complexities of modern trade and an increased tendency towards protectionism.
To replace or reform?
This issue was highlighted last month by European Commission (EC) President Ursula von der Leyen and German Chancellor Friedrich Merz. In a press conference following an EU summit, Ms von der Leyen said she had presented leaders with several options for potential new trade deals, with a closer partnership with the CPTPP group the most appealing.
"We can think about this as the beginning of redesigning the WTO - of course, understanding what should be reformed positively within it,” she stated.
Mr Merz, meanwhile, added that "the WTO doesn't work any more" and suggested a "new type of trade organization" that could replace "what we no longer have with the WTO today".
However, suggestions that the EU is aiming to fully replace the WTO have been rejected by Brussels. Following the comments, officials at the EU said that the proposed deal with the CPTPP would not involve establishing a rival to the WTO.
An EC statement said: "We are working closely with like-minded partners, including CPTPP countries, to advance meaningful, rules-based reform that upholds fair and open global trade."
What challenges may lie ahead?
The EU is already party to one non-WTO-arbitration body, the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), which has been designed as a stopgap measure to replicate the functions of the Appellate Body. However, this covers only 57.6 percent of global trade and does not address other criticism of the WTO.
A major hurdle to any efforts to reform or replace the trade body is the position of the US. The country has long-argued the WTO runs counter to its interests and the trade policies of President Donald Trump may mean it is unlikely that the country will sign up to new agreements. China would also need to be on board and would likely have to make major reforms to meet international standards.
However, Jürgen Matthes, an international trade policy expert at the German Economic Institute (IW), told Deutsche Welle that a formal application for the EU to join the CPTPP would create a powerful bloc covering almost all continents that could have a significant impact on trade.
"It would send a clear signal to the US that its protectionism is isolating it, while the rest of the world continues to liberalize trade," he stated.