The World Trade Organization’s ministerial meeting in Yaoundé was expected to mark a turning point. Expectations were modest: at least to outline a path for reform at a time when the global trading system has been under sustained pressure.
The outcome was the opposite. Rather than restoring momentum, the meeting confirmed a deepening deadlock – the WTO is no longer able to fulfil its central role as a platform for reaching agreements.
Originally published in Äripäev (Estonian): WTO tippkohtumine kinnitas, et maailma kaubanduskord mureneb
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The failure of the e-commerce moratorium captured this most clearly. What appeared to be a technical dispute over the taxation of digital trade became a test of the entire multilateral trading system’s ability to function.
A small issue with major significance
Since 1998, the moratorium had prohibited customs duties on electronic transmissions, from software to streaming services. For decades, it was extended almost automatically. This time, it was not.
The United States initially pushed for a permanent extension and later showed willingness to compromise. Brazil, however, remained firm, offering at most a limited two- to four-year extension under conditions. In the end, no agreement was reached, and the moratorium expired for the first time in WTO history.
This has two immediate consequences. First, countries now have the option to impose duties on digital services, even if most are unlikely to do so in the short term. Second, and more importantly, the broader reform package to which the moratorium was politically tied also collapsed.
In other words, a seemingly narrow issue brought down the entire reform process.
The curse of consensus
The WTO’s problem is not new, but the Yaoundé meeting exposed it particularly clearly. The organization’s decision-making is based on consensus – any member can block an agreement.
In practice, this means that even if an overwhelming majority of the 166 members agree, one or two dissenting countries can halt the process entirely.
This is precisely what happened. Brazil, and to some extent Turkey, blocked the extension of the moratorium. India simultaneously derailed the investment facilitation agreement. The result was stalemate.
As one trade expert put it: the WTO can no longer negotiate, resolve disputes, or even meaningfully deliberate. This is a systemic crisis.
The US–China shadow
The WTO crisis cannot be understood without its broader geopolitical context. The aggressive tariff policies of Donald Trump have weakened the rules-based system. At the same time, China has made effective use of WTO rules, stretching their limits – particularly through subsidies and the role of the state in the economy.
The US argument is straightforward: the system does not work because it cannot address trade imbalances or China’s state capitalism. China’s response is equally simple: without the WTO, the “law of the jungle” would prevail.
Both arguments may be valid. Yet the conflict between these two major powers paralyses a system that depends on the assumption that all members – including the largest – are bound by common rules.
The EU and the MFN dilemma
The European Union has traditionally been the strongest advocate of multilateral trade. In search of a way out of the current deadlock, it has attempted, together with the United States, to reopen discussion on one of the WTO’s core principles – the Most Favoured Nation (MFN) clause.
The idea was to introduce greater flexibility into the application of MFN. In practice, this would allow groups of countries to reach deeper agreements among themselves without automatically extending those benefits to all WTO members.
This represents a significant shift. The MFN principle has long been the backbone of the WTO system, requiring equal treatment for all trading partners. Relaxing it would effectively acknowledge that universal multilateralism no longer functions.
The EU’s position is therefore somewhat contradictory. On the one hand, it continues to defend the “rules-based order.” On the other, it is increasingly active in pursuing bilateral and regional agreements where MFN logic does not apply in practice.
The plurilateral path as the new normal?
The outcome of the Yaoundé meeting confirms a broader trend in the global trading system.
An increasing number of countries appear willing to pursue a plurilateral approach: smaller “coalitions of the willing” form agreements among themselves, bypassing the WTO’s consensus requirement. A group of 66 countries has already decided to move forward with a digital trade agreement despite the failure to reach a universal deal.
This is no longer a temporary workaround, but an emerging norm.
In some respects, this approach resembles the pre-WTO era, when countries chose which agreements to join and which to avoid. It may offer a pragmatic solution to a paralysed decision-making process, but it undermines the universality of the system. Instead of a single set of rules, a fragmented trading order begins to emerge, where rights and obligations depend on membership in specific “clubs.”
Regional and bilateral alternatives
Alongside WTO stagnation, regional and bilateral trade agreements are gaining momentum. The European Union is particularly active in this regard.
Recent developments include agreements with India, the Mercosur bloc in South America, and Australia. At the same time, the EU is exploring deeper cooperation with partners in the Indo-Pacific region.
These developments are not accidental. They reflect a deliberate strategy to diversify risk and reduce dependence on both the United States and China.
A similar logic can be seen in recent diplomatic initiatives, including French President Emmanuel Macron’s visits to Japan and South Korea, where he emphasized the need to build new trade coalitions that support open economies without relying entirely on the WTO framework.
Taken together, these trends point in the same direction: both large and medium-sized economies are preparing for a world in which the WTO is no longer the central architect of global trade rules.
Who wins and who loses?
The weakening of the multilateral system does not affect all countries equally.
Paradoxically, the largest beneficiaries are those that have been most critical of the system – the United States and China. Both possess sufficient economic and political weight to shape trade conditions through bilateral or regional arrangements, without being constrained by universal rules.
The greatest losers are smaller states and many mid-sized economies. The original logic of the WTO – to provide protection for weaker countries against the pressure of stronger ones – begins to erode.
As one Caribbean diplomat observed, every weakening of the WTO makes small states more vulnerable.
The European Union sits between these two worlds. It is large enough to influence rule-making, yet more dependent than the United States or China on an open and predictable trading environment.
What comes next?
In the short term, discussions will return to Geneva, where efforts will be made to restore at least the e-commerce moratorium. However, this would be more of a temporary fix than a substantive breakthrough.
In the longer term, three possible trajectories emerge.
The first is a plurilateral WTO, where the organization continues to exist, but within it smaller, more flexible agreement clusters develop. The universal system does not disappear, but becomes layered.
The second is regional fragmentation, where trade increasingly revolves around major economic blocs such as the European Union, Indo-Pacific partnerships, and various Asian networks. Rules diverge across regions.
The third, more pessimistic scenario involves a return to power-based trade relations, where tariffs, countermeasures, and economic pressure replace a rules-based framework.
Most likely, the future will combine elements of all three: a system in which universal rules, regional agreements, and power politics coexist in constant tension.
Europe’s choice
For the European Union, the challenge is no longer simply how to preserve the WTO, but how to operate in an environment where its importance has objectively declined.
If previous strategy relied on the assumption that a rules-based multilateral system would provide sufficient protection for European economic interests, current realities require a reassessment.
This implies a more multi-layered approach. Narrower but more functional arrangements with like-minded partners may allow for faster progress. There is already a visible shift toward bilateral and regional agreements as a means of securing market access and influencing rule-making outside the constraints of global consensus.
At the same time, this requires a readiness to deploy defensive measures in a world where other major economies are doing the same.
This shift does not necessarily mean abandoning rules, but rather adapting how they are applied – moving from a universal ideal toward a more pragmatic, context-driven trade policy shaped increasingly by geopolitical realities.
Conclusion
The WTO crisis is not the result of a single failed meeting or even a dispute over digital trade. It is the culmination of a longer process in which economic power, technological change, and geopolitical rivalry have gradually undermined the foundations of the rules-based system.
If major powers no longer see value in universal rules, but instead in flexible exceptions and selective agreements, the institution itself inevitably becomes secondary.
The question is therefore not whether the WTO can be repaired, but through which mechanisms global trade rules will be shaped in the future.
Plurilateral initiatives, regional agreements, and the growing importance of bilateral relations already point toward a system in which universal equality gives way to a more layered and selective order.
In such a system, rules do not disappear, but their scope and binding force change. A single framework gives way to parallel arrangements, where access and conditions depend increasingly on participation rather than membership alone.
The WTO’s central promise – equal rules for all – may remain formally intact, but in practice it becomes only one option among many.
For more analysis on global economic and geopolitical change, read:
What comes after capitalism? Europe and the future economic system