Tomi Kristeri: Can the broken trading system still be fixed?

The global trading landscape is increasingly defined by tariffs, economic coercion, and rising great-power competition. Rather than stemming solely from political leaders like U.S. President Donald Trump, these developments reflect structural shifts in technological advancement, the rise of the Global South, and realigned geopolitical relations. Contrary to popular narrative, this shift does not signal the end of globalization, but is instead a crisis of global governance. Built for a bygone era, global institutions have struggled to channel these structural conflicts through the multilateral system of rules.

This institutional paralysis mirrors historical precedent. Following the First World War, the decline of British economic leadership left a vacuum that led to a proliferation of destructive protectionist policies. To prevent a repeat of this scenario after the Second World War, the U.S. drove the establishment of the General Agreement on Tariffs and Trade (GATT), which later evolved into the World Trade Organization (WTO). The WTO’s binding dispute settlement mechanism was designed to insulate international trade from geopolitical shocks, operating on the premise that institutionalization could eventually substitute for unipolar leadership.

By the 1990s, European and Japanese economic recovery and China’s market integration highlighted structural faultlines in the system. Following its 2001 WTO accession, China retained state-driven economic policies and subsidies that heavily distorted international competition. Simultaneously, divergent economic interests between industrialized nations and emerging economies made consensus increasingly difficult to achieve, leading to the prolonging of multilateral trade negotiations.

The WTO proved ill-equipped to resolve these issues through political consensus, relying instead on its binding dispute settlement system to manage conflict. However, this judicialization of trade disputes created further friction, as key members felt the Appellate Body was exceeding its mandate. Viewing multilateral rules and judicial rulings as overly restrictive of its sovereignty and national interests, the U.S. ultimately paralyzed the Appellate Body by blocking judicial appointments, effectively disabling the core enforcement mechanism of multilateral trade rules.

The crippling of the WTO’s enforcement mechanism has directly accelerated unchecked great-power competition. The absence of an effective multilateral arbiter, coupled with sluggish economic growth and intensifying geopolitical rivalries, has produced conflicts that a functional WTO system might otherwise have mediated. Without a working multilateral framework, these disputes are now addressed unilaterally, triggering cycles of trade wars.

The absence of enforcement capability for global rules has resulted in divergent calls to reform the WTO. The U.S. has called for trade based on reciprocity rather than unconditional non-discrimination, objective criteria for developing-country status, agreements that deny benefits to non-signatories, and no WTO review of national security measures. This is largely consistent with protecting its own industries against Chinese competition on security grounds.

The EU has outlined its own suggestions for reform, calling for stricter rules on subsidies and state intervention, measures to unblock decision-making, and sector-specific agreements whose benefits are reserved for participants. While the EU is more intent on maintaining a rules-based core through institutional flexibility, its proposal largely aligns with the U.S. vision. Like the U.S., the EU aims to shield its internal market from Chinese competition while retaining enough openness to support its export-oriented sectors and mitigate further system deterioration.

In contrast to these proposals, China presents itself as a defender of an open, non-discriminatory system against unilateralism. It has pledged not to seek new special treatment in future negotiations and signaled openness to subsidy talks, provided they respect its state driven economic system and preserve room for industrial policy. As the world’s largest exporter, China benefits significantly from non-discrimination, and its defense of the current framework keeps its economic model largely shielded from global oversight.

Ultimately, fixing the world trading system will not mean restoring the post-Cold War vision of universal rules, but rather adapting to a new landscape of geoeconomic competition. Given the sharp divides among key trading powers, a unified system is unlikely to re-emerge. Instead, global trade is likely to increasingly rely on plurilateral deals, regional blocs, and minilateral strategic partnerships. In other words, the system will continue, but within defined geopolitical boundaries.