Part III of the Special Series for Global Organization and Function: a collaboration between WGI.WORLD (World Geostrategic Insights) and CGPS (Center for Global Peace and Security).
By Sunny Lee – Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea-U.S. Political Development), Washington DC.
Economy is the most important factor in defining a country’s national competitiveness, and in global society, major powers and minor countries compete with each other.
Sometimes, national interests give rise to serious conflicts, such as the trade war between the United States and China, which impacts the international trading system. Furthermore, international economic sanctions have seriously deteriorated the internal situation of belligerent countries, as it is the critical case with Russia, due to its attack on Ukraine, or North Korea, for continuously launching missiles and conducting nuclear tests.
Nonetheless, global society has focused on economic prosperity, and a future vision. From developed countries to developing countries, they share the same agendas to obtain economic leverage by enhancing their national competence. And it’s also the only way to increase the domestic economy, because trade in international markets symbolizes the national power of each country. However, without trading regulations, or international economic organization systems, it is unable to reach the maximum goal.
The World Trade Organization (WTO), founded in 1995, has over 20 agreements that all member states must sign and ratify. In 2001, after 15 years of negotiations, China became a member and in 2011, after 18 years of very long negotiations, Russia was finally ratified as a member state. In particular, the WTO includes the major economic powers through commercial interests, regardless of the New Cold War that aggravates national hegemony. 166 member states represent over 98% of global trade and play a vital role in global governance. It has supreme authority over the International Court of Justice. The WTO aims to constitute the only bloc in the global economy, abolishing obstacles to trade.
Since Covid-19, the simultaneous shocks that the world economy is facing as a global phenomenon have generated challenges ranging from public health to security. It would reverse the steady reduction in poverty, leaving many impoverished countries behind in terms of economic recovery. The war in Ukraine has caused food and oil shortages with a sharp economic slowdown in international society. The climate crisis also manifested itself in various forms, requiring urgent action to protect and preserve the global environment and resources. In addition, the WTO faced unprecedented challenges, such as the stagnation that hampered its negotiating functions and the paralysis of its appellate body as a sub-organization.
However, ambitious WTO reform activities have been intensified, highlighting the critical need for revitalization to maintain its central position in the global trading system. On March 2, 2024, the WTO Ministerial Conference defined a forward-looking reform program to rejuvenate the dispute settlement system and committed to persevere in negotiations in areas lacking consensus, fulfilling its function. These efforts will successfully reverse the WTO’s imminent decline and ensure its future vision as a more critical trading system that will foster global prosperity.
International Trade System
The WTO is an intergovernmental organization that regulates and facilitates trade worldwide, making it the largest international economic organization in the world. Member countries can use the organization to establish, review and enforce the basic rules governing international trade in collaboration with the system of the United Nations. The WTO facilitates trade in goods, services and intellectual property among participating countries by providing a framework for negotiating trade agreements aimed at reducing or eliminating customs duties, quotas and other restrictions. The agreements are usually signed by representatives of member governments and ratified by their parliaments. The WTO prohibits discrimination between trading partners, with exceptions for environmental protection, national security and other important objectives.
As a global trading system, the WTO has explored its function of strengthening the international economy by abolishing all regulations and obstacles. Furthermore, it has itself contributed to resolving global crises and dilemmas in various sectors.
First, it promotes trade as an important part of global prosperity that lifts a billion people out of extreme poverty. The WTO has played a key role as a rules-based multilateral trading system that globally open markets have led to a more complex division of labor with greater specialization, scale and competition. For example, predictable market access combined with innovations in transportation and communications technology explore cross-border supply chains as a symbolic feature of contemporary production and trade.
Second, trade would be more beneficial in the global crisis under the control of the WTO. Since the beginning of the pandemic, trade has been a lifeline for the production of medical supplies, from masks to vaccines. In particular, Covid-19 vaccines are made through multinational supply chains, which include 19 countries each for the Moderna and Pfizer/BioNTech vaccines.
Global trade is also an important means of adapting to climate change and reducing emissions. It plays a key role in importing supplies after a natural disaster, in spreading cutting-edge technologies around the world or in promoting international competition to reduce the cost of green energy. Furthermore, with regard to food security, the WTO focuses on rescuing net food-importing countries, which is necessary to shift supplies of grain and fertilizers. For example, the Black Sea Grain Initiative has worked to prevent current market tensions from turning into a real food shortage due to the war in Ukraine.
Third, it is the WTO’s contribution to overcoming global challenges. Since trade has become an important part of the solutions to global issues, the WTO’s role has been strengthened. Whenever challenges to the global commons arise, the WTO plays an indispensable role in ensuring that trade is a fundamental part of the solutions. Global society has faced two fatal tests: the financial crisis of 2008-2009 and the economic contraction caused by Covid-19. At that time, the global trading system fulfilled its fundamental mission of helping governments minimize protectionist pressures and avoid a repeat of the Great Depression of the 1930s.
Fourth, the WTO provides a forward-looking vision and policy as an improved trading system. Despite its considerable success in overcoming the global crisis, it has faced strong opposition from both developing and developed economies. However, the WTO system would reduce trade costs for companies of all sizes in regional or global value chains. WTO member states can also impose improved regulatory flexibilities to help countries in difficulty participate more effectively in global trade.
Economic Challenge and Development
On February 2, 2025, Alan Rappeport, a New York Times journalist, published a curious article stating that the “Trump tariffs” threaten to overturn the global economic order with a very negative signal in a commercial hurricane. Trump’s bold move to impose tariffs on Canada, Mexico and China threatens to fracture the global trading system and a world order that the US economy has led to open investment and free markets. In addition to the second round of the trade war with China, it extends heavily not only to Canada and Mexico, but also to the countries of the free trade agreement.
Since taking office, Trump’s tough orders based on protectionist trade measures could lead to the opposite effect, namely that tariffs could inflame inflation and paralyze American industries. They could even strengthen China as the most powerful global trading hub, trumping Trump’s concerns about fentanyl smuggling and illegal immigration. Paul Ashworth, senior economist at Capital Economics, has diagnosed that the symptom of an escalating trade war could manifest itself in the form of slower economic growth and higher prices. This could lead to inflation in the United States due to these tariffs and other future measures that could be swifter and more extensive than initially expected.
However, the executive orders relating to all goods imported from Canada and Mexico will be subject to a 25% duty, with the exception of Canadian energy products with a 10% duty. Trump strongly announced an additional 10% duty on all Chinese products, so that China conspired to apply retaliatory duties of 10-15% on about 80 American products. Outraged Canada and Mexico also promised to react quickly with their own tariffs, and China would pursue countermeasures to safeguard its commercial interests. Now, Trump’s intimidating tariff diplomacy is freezing global commercial investments and trade markets. Most US car manufacturers have an integrated industrial base in America, Mexico and Canada. Automotive components often cross these borders in the vehicle assembly process, so the 25% tariff demand will be a fatal disaster for the automotive sector.
Ironically, China and India have ended their long-standing relationship as enemies to counter Trump’s dogmatic tariff order, like an earthquake that could sink two economic powers. Even if the rapprochement between India and China is an unintended consequence of Trump’s threat to impose massive tariffs, the two Asian giants will at least strengthen their ties with the BRICS to face a common economic challenge. Trump used to announce tariffs of 100% on BRICS members if they didn’t abandon their long-standing plan to create a rival currency to compete with the US dollar.
However, Trump’s obstinate adventure clashes with the new position of China and India, which intend to remain united to take advantage of each other’s markets, mitigating economic and geopolitical risks. In particular, China’s surprising advantage in new technologies, thanks to the “DeepSeek” phenomenon, is attracting investments in the Global South, as it is a leader in 57 of the 64 technologies monitored. Although India is struggling with rapidly growing unemployment and high youth unemployment rates, it is willingly following China’s technological adventure to achieve a higher ranking in the world economy. A deeper engagement with India would be an important buffer for China against the US policy of containment through tariffs.
Not only China, but also many emerging countries in Asia with high economic growth have shaken the world economy, leading to a multipolar system as a repercussion of the WTO. As a result, international society is facing serious turmoil that WTO rules and regulations would not be able to correct the economic inequality between developing and developed countries. In particular, China, India, Russia and Brazil, belonging to the BRICS, have exerted strong pressure to modify trade regulations centered on developed countries. The United States, Japan and the EU have finally accepted reforms for the economic growth of developing countries in order to extend their commercial interests.
In 2001, the Doha Development Agenda established the rule that considers individual free trade without reference to tariff and non-tariff barriers as a standard of global trade. It aims to promote the economic exploration of developing countries and thus resolve discrepancies with developed countries. Furthermore, the Doha Development Agenda initiates a continuous and equal diffusion of the new economies that represent the Internet and cutting-edge technology throughout global society. In particular, the United States and the European Union are paying increasing attention to the negotiation of preferential trade agreements in the DDA, defining it as a mega-regional partnership.
Furthermore, the developing countries’ commitment to the WTO has been based on the assumption of “Special and Differential Treatment” (S&D), which prefers to accept WTO membership with greater trade barriers, less than full reciprocity in multilateral trade negotiations. High-income countries also provide preferential access to their markets for exports from developing countries through the “Generalized System of Preferences” (GSP): duty-free and quota-free access for least developed countries.
There are many opportunities for small businesses in developing countries to advance in global markets. In addition, exports to developing countries can benefit from financial aid that offers advantages deriving from preferential customs duties. The WTO helps producers of goods, as well as exporters and importers of services, to ensure that commercial transactions take place in the smoothest, most predictable and freest way possible. In this way, producers can guarantee secure supplies and a better choice of services for consumers, so that foreign markets remain open to them at all times and are also much more prosperous, stable and responsible.
WTO’s Obstacle and Inequality
According to WTO data, trade liberalization has incredibly increased global income by a whopping 510 billion dollars since its establishment in 1995. The WTO rules, the dispute settlement mechanism and the work of its secretariat have become the platform for effective management and consistent performance of global trade. During the global financial crisis of 2008, the decline of economies and the increase in the unemployment rate aggravated the pressures to defend national industries. On the contrary, the WTO was obviously credited for having stopped the fall into the phenomenon of protectionism, which many countries tried to overcome with monetary desperation.
Despite the WTO’s indisputable success in the global crisis, an evolving international environment would create a series of important challenges and confrontations. For example, the Doha Development Agenda is the current round of multilateral trade negotiations to further liberalize trade and reform the WTO. It focuses mainly on the reduction of significant trade barriers in sectors such as agriculture, industrial goods and services, to offer consumers better and cheaper goods with the right of access to the market by developing countries. The WTO estimates that the DDA could increase global GDP by 150 billion dollars a year.
Ironically, the Doha Development Agenda was blocked by the lack of interest of the economic superpowers without obtaining the full agreement of the member states. Furthermore, it stimulates free trade agreements between developed countries with economic hegemony to control international trade markets. More than 50% of global trade comes from free trade agreements or intra-regional trade by countries that have signed the economic integration agreement. As a result, countries that trade abroad outside of free trade agreements are being pushed back from global trade markets. Such an uneven environment and discrepancy stifles the original purpose of the WTO to make international trade prosper.
In 2018, Roberto Azevêdo, the WTO’s director-general, announced with dismay and horror that the WTO is actually on the road to a process of incapacitation. He emphasized that the WTO cannot stop Trump’s chauvinistic tariff war not only with China, but also with the world economy. Trump is said to be a stubborn nationalist who often mentions the WTO withdrawal, and claims that no country can win against the United States despite the lawsuits filed at the WTO.
The obstacles and inequalities of the WTO have been revealed through the major economic powers. For example, every time there was a vacancy on the Appeals Board, the United States refused to appoint new members, so that the “Special and Differentiated Treatment” (S&D) function was effectively suspended after September 2018. Furthermore, since Trump totally refused to consent to appoint all the judges of the Appellate Body on December 10, 2019, as China’s lawsuit aimed, its function has been completely interrupted. However, the WTO can avail itself of supplementary arbitration procedures as a substitute, according to the WTO agreement, and its binding power is the same as the result of the normal process.
Furthermore, the WTO Dispute Settlement System (DSS) has been the central pillar of the multilateral trade in system, contributing significantly to the stability of the global economy. If members violate trade rules, the multilateral dispute resolution system is immediately utilized instead of taking unilateral action. The dispute resolution system has been considered as the world’s most active international judicial mechanism, in which trade has increased with a future outlook.
Common Prosperity and Global Vision
Rebeca Grynspan, head of UNCTAD (United Nations Conference on Trade and Development), delivered an important message during an event held in Geneva on June 27, 2024: “The collective commitment to multilateralism remains the key to addressing global challenges and promoting inclusive development”. UNCTAD has been working with the WTO to promote a more equitable and sustainable world, encouraging economic growth, empowering communities and small businesses, and encouraging countries to strengthen economic resilience.
Basically, the WTO is a place where member governments strive to resolve trade issues through negotiations when they have problems with each other. Most of the WTO’s current work stems from the Uruguay Round negotiations of 1986-1994 and previous negotiations under the General Agreement on Tariffs and Trade (GATT) since 1948. The WTO is currently hosting new negotiations under the Doha Development Agenda launched in 2001.
Where countries have faced barriers to buying and selling and have had to lower them, the negotiations have helped open markets to trade. But the WTO doesn’t just exist to open markets; its rules support the management of trade barriers to defend customers. It helps the free flow of trade by removing obstacles and ensuring that individuals, companies and governments around the world are safe from unexpected policy changes.
Even though the WTO has been at the center of the trade war between the United States and China, its positive role has made a huge contribution to common prosperity through multiple trading systems. First of all, it prevents monopolistic hegemony between developed and developing countries and guarantees equal opportunities in trade relations through variable negotiations and dispute resolution.
The WTO leverages the global economy with a forward-looking vision, overcoming the gap or discrepancy between member states. An important objective of the WTO, maintaining transparency, inclusiveness and public participation, will be strengthened as a better world order. It also requires a collaborative effort, openness to innovative ideas and resolution of pressing challenges in ways that ultimately promote global prosperity.
Author: Sunny Lee – Founder and President at CGPS (Center for Global Peace and Security), and Director at IKUPD (Institute for Korea-U.S. Political Development), Washington DC. Sunny Lee is the author of 115 academic books in politics (original English and in German, French, Russian, Polish, Dutch, Italian, Spanish, and Portuguese). She is a bestseller writer not only in politics but also in literature on Amazon. Her recent book is titled: “The Influence on Humankind’s Peace through Korean Reunification: Creating new paradigm in social science by interdisciplinary research.”
(The opinions expressed in this article are solely those of the author and do not necessarily reflect the views of World Geostrategic Insights).