The author of this analysis, a senior fellow at the Centre for International Governance Innovation and a former executive director at the International Monetary Fund (IMF), reflects on the precarious state of the World Trade Organization (WTO) following President Donald Trump’s recent tariff announcement. Dubbed “Liberation Day” by Trump, this move could potentially dismantle the already fragile international trading framework that the WTO has established over the years.

The WTO operates on two foundational principles: “national treatment” and “most favoured nation” (MFN). These principles are intended to create a stable and predictable trading environment that encourages investment across nations. The national treatment principle ensures that once goods pass through customs, they are treated equally to domestically produced products, preventing discrimination against foreign imports. Meanwhile, the MFN rule mandates that any trade advantage offered to one member state must be extended to all other WTO members, promoting fairness and equality in trade.

However, Trump’s recent tariff actions pose a significant threat to the very fabric of this rules-based system. Instead of fostering cooperation and stability, such unilateral decisions risk transforming the global trading landscape into a chaotic series of bilateral agreements, undermining the multilateral negotiations that have been the cornerstone of international trade law.

Yet, amidst this turmoil lies a unique opportunity to push for much-needed reforms that could modernize and reinvigorate global trade governance. A familiar adage attributed to Winston Churchill comes to mind: “Never let a good crisis go to waste.” In light of this sentiment, it is crucial to grasp this moment to re-evaluate and improve the WTO’s outdated operational practices, particularly the long-standing consensus rule that governs decision-making.

Currently, the WTO typically endeavors to reach decisions by consensus, rather than through a straightforward voting process. While this method is intended to promote cooperation, it often leads to stalemates, especially when trade negotiators perceive proposals as opportunities for gaining concessions rather than cooperating. This entrenched mindset encourages opposition to initiatives that could benefit the collective, ultimately stifling progress.

There are two major reasons why the consensus requirement is becoming an impediment to effective decision-making within the WTO. First, it operates under the assumption that all member states possess equal rights and obligations, which overlooks the stark disparities in their levels of involvement and influence in global trade. Second, as geopolitical tensions escalate, achieving consensus becomes increasingly elusive, turning what should be a collaborative tool into a considerable barrier.

If we genuinely aspire to revitalize the WTO, it is essential to boldly reconsider the consensus mechanism in light of contemporary global trade realities. One proposal could involve implementing a double majority rule, which would require at least 65 percent of voting members representing 75 percent of world trade to approve decisions. Such a shift would not only facilitate decision-making but also ensure that the voices of the majority are heard.

In parallel with this potential change, it is also vital to enhance provisions for special and differential treatment, which are intended to grant developing countries additional rights and flexibilities within the trading system. This would help address the existing imbalances and support a more equitable trade environment.

Launching any reforms poses a challenge, particularly when trust among WTO members is at such a low point. However, rebuilding that trust is possible by identifying pathways for constructive change. One innovative approach could be the establishment of an independent evaluation office within the WTO, akin to those found in Bretton Woods institutions and various regional development banks. Although introducing such an office would not guarantee reform success, it could ensure that critical issues are not overlooked and facilitate a more thorough examination of policies and practices.

The concept of an independent evaluation office is not novel, and the associated costs should not be prohibitively high. For instance, at the IMF, this office operates on only 0.5 percent of the fund’s operational budget, yet it has proven to be highly effective in enhancing accountability and transparency. If the WTO is to remain relevant in an ever-evolving global landscape, it must seriously consider adopting a similar model.

The way forward does not have to involve increasing retaliation and disorder. Thoughtful policymakers should respond to Trump’s “liberation” announcement by reinforcing the importance of trade cooperation over adversarial approaches. Initiating a process to reform and modernize the WTO could convey a message of stability and reassurance to global markets, asserting that a collaborative future is possible amidst the uncertainty.