Nearly three decades after its establishment, the World Trade Organization (WTO) finds itself teetering on the brink. The role that the organization played during the monumental times of global economy transition is definitely notable. It was a key player in fostering and facilitating the process of which trade is liberalized, transforming the global economy by making the transfer of capitals, goods, and services across nations more fluid than ever before. It works as a trade governing body whose main purpose is to foster a fair and orderly trade environment which starts with the tariffs and barriers regulations to dispute settlement mechanisms. However, the last two decades have perhaps shaken the grounds where the body stood in the global economy. The WTO has seen unprecedented challenges that may just have started since the 2008 financial crisis to the most recent outbreak of covid-19, or yet trade war between power economies. Observing the current pattern unraveling in global trade, there’s enough grounds to argue that we are now seeing states moving away from multilateralism as introduced by the WTO and that perhaps we have now entered the era where mercantilist policies taking precedence over David Ricardo’s comparative advantage model or his predecessor, Adam Smith, ideas on absolute advantage. This essay will investigate the occurring pattern of the dilution of multilateralism in global trade relations starting with the Asian spaghetti bowl which was coined by Jagdish Bhagwati to the re-election of Donald Trump and its implication to the US’s trade policy. Central to this essay is the question, is the World Trade Organization (WTO) facing irrelevance?

Friedrich List’s idea of the national economy, which contrasts with Adam Smith’s theory of absolute advantage, lies at the heart of this essay. According to Smith, states would want to gain advantages by creating items that employ lower opportunity costs than those of other nations, rather than by monopolizing the market. In essence, Smith’s conception of the global economy is an interdependent system that incentivizes people to meet one other’s needs by specializing in certain commodities where they have an absolute advantage (Blecker, 1997). While absolute advantage according to Smith is approached through a classical free-market perspective, List’s conceptualization of absolute advantage is rooted in the interplay between nationalism and economy thus the matter of protectionism.  List, as cited in Levi-Faur (1997), has a notable amount of works discussing the politics of nation-state in the global economy where he coined several concepts such as ‘infant industry theory’ and ‘productive powers’. Productive powers of state, as List argued, are nationally bounded, that are not easily transferable and formed through the ramifications of laws, norms, ideas, and identity. This makes national interest, in List argumentation, to take precedence over some classical economist argumentation on free trade and global benefits. State’s role based on his arguments is central in the protection of the nation’s productive powers that may include the rejection of free-trade. Understanding List’s perspective of absolute advantage will help us to understand the pattern of trade unfolding in the modern-day world economy and to determine what truly is the state of WTO.

Liberalizing the market has definitely brought about the unprecedented process of economic integration where many studies done to particularly identify impacts and consequences of such in certain states or areas (see SánchezAncochea et al., 2006; Thanh, 2005; Morales, 1960). The growth of regional integration of trade can be observed through the proliferation of Free Trade Agreements and Preferential Trade Agreements. While PTAs have always been an accepted and recognized practice of the global trading system, the surge in number that it has seen is striking. From the early 1990s to 2019, it is recorded that global trade experienced a 500% growth rate in the number of PTA (Mattoo et al., n.d.). Within the span of 10 years, from 2010 to 2020, the proportion of which world trade is covered by FTAs experienced the growth approximately by 19.7% (Dadush & Prost, 2023). Southeast Asia, arguably, showcasing a unique trade liberalization pattern. While it is recorded that the region experienced a significant domestic liberalization from the 1980s to the 1990s, however a decade later, the region remains behind in multilateral liberalization yet number of FTAs and PTAs are notable (Hill & Menon, 2010). 

Hill (2008) explains that the agreements between major economies and other actors were made upon specifying “trade plus” regulations and exemptions. The term “trade-plus” itself is now a common trend where it essentially refers to agreements that cover beyond traditional trade matters such as social and environmental aspects such as labor. As these agreements become more ‘customized’, more unlikely they will ever be plurilateral agreements in the future. This is mainly the result of a very straightforward and meticulous set of standards that hardly can be followed by states outside of those agreements. The formation of custom unions following the bilateral preferential trade agreements among two or more countries also turn this type of agreement less desirable for other countries to join, for it requires extensive adjustment of monetary policy and regulations. To better explain such a scenario, a look at the European Union (EU) will perhaps give a general idea how custom union imposes restrictions on those outsides of the agreeing partners. Custom union between European Union is made not only to eliminate tariffs but also followed by the establishment of ‘Custom External Tariff’ (CET) which essentially rules out the tariff imposed by all EU countries to non-EU countries in hope of avoiding any distortion occurring to the region’s market. However, the establishment of a customs union is also what makes ‘trading blocs’ particularly troubling and simultaneously discourages the formation of economic linkage.

Different scholars give different names to address the situation, while Bhagwati coined ‘Asia Spaghetti Bowl’, Menon (n.d.) use ‘Asia Noodle Bowl’. However, both agree that this phenomenon stands for the decreasing expected economic benefits related to the diversification of trade due to the surge of cost in doing business, discriminatory trade policies, and welfare deficits.

Both the conduct of either PTAs and FTAs are ruled within the clauses that exist in GATT departed from the Most Favored Nations principle. To maintain the enforceability of the said principle, PTAs and FTAs are ruled out to be done amongst the developing countries as a means to ease the elimination of barriers and tariffs where certain criteria must first be met before the said agreements are enforced (Kloewer, 2016). However, questions are raised regarding the effectiveness of the WTO’s control mechanism over these bilateral agreements where now every member of the WTO is a member of at least one bilateral trade agreement. One could argue that countries are less likely to wish to follow WTO rules if there is a greater expectation that these agreements would produce the desired results.

It is even harder to see now how the rules-based system the WTO tries to uphold can withstand the onslaught of worrying dynamics where rules are so actively and blatantly infringed. Especially where the United States, the attributed founder for said system, becomes the very perpetrator behind the many lists of instances when WTO rules are being significantly undermined. The US has been perceived to have shifted towards the resurgence of protectionism in recent years, as evidenced by the trade policy it employs upon the course of economic competition with China (Krueger, 2024). Undeniably, the United States, as a major world economy, has the power to influence the trajectory of global trade from how it shapes and forms its domestic policies. Thus, events such as the presidential election is certainly a monumental time many are actively and carefully observing. Donald Trump’s reelection to power undoubtedly caused many to expect the increased implementation of protectionism measures in the days leading up to his second term, given his “America-first” stance. His first term was when the US and China trade relationship was becoming extremely strained due to the wide implementation of tariffs to many Chinese goods and companies. From the presidential debate leading to his re-election, many are even more convinced that the US will only become even more strict with its tariffs regulation and cause further disruption to both European and Chinese markets (BakerHostetler, 2024; economy, 2024).  The way in which Trump and his administration expresses their rather seemingly doubtful perspective towards multilateral agreements and initiatives during his first term, made several worries of the continuation of trade pacts established during the Biden administration now that he enters his second term (Sharma, 2024). Highlighting the incapacity of the WTO in present, Trump has also previously made obvious of his doubts towards the body which followed by the re-orientation of the US’s trade policy into strengthening ‘America’s industrialization’. It is anticipated that in the years to come, US trade policy would undoubtedly focus on reversing China’s increasing dominance in international trade which is in the country’s best interests. Although that comes in the cost of its commitment towards the free-trading system.

Mercantilist orientation that the US trade policies are moving toward creates problematic implications to the global trade system most importantly the WTO. In whatever ways the domestic power play in the US unfolds, it becomes evident that global trade is on the run for yet another regression from the fair and orderly system that once the WTO imagined. Having recognized the standing of the United States in the global power play, it is only likely that without collective actions from other states, the WTO will continue to be mobilized. Will it ever come to the point where the WTO ceases to exist? I don’t particularly think that would be the case, although if the present remains unchanged then the body may as well turn into yet another playground for power competition. Yet, it takes a dysfunctional system to highlight the functionality of another. The dysfunctionality of the WTO may as well come to the favor of the US where it is now in the race of leading the global market. 

The question we began with—Is the WTO at risk of irrelevance? —highlights the troubling trajectory that global trade has been following in recent years. The failure of the World Trade Organization (WTO) to maintain its relevance signals a broader regression in the multilateral trading system and the weakening of the liberal economic principles it was built upon. As the organization struggles to keep pace with the increasing number of bilateral agreements pursued by its member states, these agreements increasingly undermine the very rules that the WTO was designed to uphold.

The WTO’s inability to effectively counter the proliferation of Preferential Trade Agreements (PTAs) and Free Trade Agreements (FTAs) reflects a deeper issue. Even a key player like the United States, once a staunch advocate for the multilateral trading system, has openly expressed skepticism about the organization’s ability to meet current global challenges. The U.S. has shifted its focus toward protectionist policies, a move that further weakens the WTO’s framework.

In an era where geopolitical rivalry often eclipses economic cooperation, this trend threatens the stability of the global economy. Without a robust multilateral system like the WTO to counterbalance this shift, the world economy may continue to suffer from welfare deficits. The future of global trade hinges on the ability to revitalize multilateralism and reaffirm the importance of shared economic principles. If this trend continues, the risk of deeper fragmentation in global trade becomes increasingly apparent, which may lead to further economic instability and inequality.