In a communication to the World Trade Organization (WTO) on 15 December 2025, the United States (US) wrote that it has been a leader on WTO reform since 2017, but now feels that it cannot solve all existing and future challenges to the trading system. The US blames it, implicitly, on China’s predatory economic policies like overcapacity and concentration of production, which has reduced other countries’ manufacturing capacity and created severe trade imbalances.
The communication first addresses the three-pronged reform pathway proposed by the Norwegian Ambassador to the WTO as facilitator on WTO reform: governance (decision-making), fairness (special and differential treatment to developing countries), and issues of our time (level playing field).
On decision-making, the US advocates for plurilateral negotiations as the way forward for the WTO as it believes that substantive agreement of any significance is very unlikely with the current WTO practice of decision-making by consensus. It does not mention, however, that the Trade Facilitation Agreement and the Agreement Fisheries Subsidies were negotiated through the same consensus principle and came into effect as recently as in 2017 and 2025 respectively. Similarly, it ignores the fact that the International Dairy Agreement and International Bovine Meat Agreement, two of the four plurilateral agreements in the WTO acquis, were withdrawn by its members because they believed that the sectors were better handled under the multilateral Agreement on Agriculture and the Agreement on the Application of Sanitary and Phytosanitary Measures.
On special and differential treatment, the US believes that it is untenable for WTO rules to apply to some members, and not others, in perpetuity. It suggests that reform in the area of ‘development’ must focus on transitioning all members to follow the same rules, regardless of their economic differences. But it presents no solutions. The WTO has negotiated solutions in the past. For example, WTO agreements provide special treatment to developing countries in terms of longer transition periods after which they follow the same rules as others. The US and other developed countries have benefitted from the installation of minimum standards on protection of intellectual property rights once the transition periods for developing countries ended in 2005. Similarly, developing countries graduate out from special treatment in grant of subsidies once they reach a certain threshold share of global trade in a product.
On level playing field, the US rues actions of members with economic systems that are incompatible with the principles of the WTO and recommends transparency, including through notification obligations with an enforceable compliance mechanism. But that is already possible so long as the US allows the WTO dispute settlement to work fully as panels and Appellate Body have several times held members to their transparency obligations. Levelling of the playing field as envisaged by the US perhaps means more than just transparency, but the US does not elaborate.
The next section of the US communication identifies additional issues that need to be addressed. Two of them merit closer attention.
First, it believes that the most-favoured-nation (MFN) treatment principle was designed for an era of deepening convergence among trading partners that were expected to adopt open, market-oriented trade policies. The US believes that such policies are not being followed by those who pursue chronic trade surpluses that have adverse economic and political consequences in deficit countries. It concludes that ‘MFN impedes welfare-enhancing liberalisation’, forcing members to either enter into free trade agreements or not liberalise at all. However, the US argument is contested in trade literature. In fact, MFN results in higher aggregate world welfare as it eliminates global inefficiencies on account of customs duty differences. Moreover, MFN promotes an equitable international trade order as it prevents developed countries from imposing reciprocal and discriminatory tariffs on developing countries because of their lesser negotiating power.
Second, the US believes that judgments on matters of essential security interests need to be left to governments and not adjudicators. But it does not define what constitutes essential security interests. The WTO adjudicators have remained aloof of interfering in trade measures taken on this account, so long as there is no doubt about the correlation between the trade measure and the security interest it serves. Nevertheless, adjudicators have had no doubt about justiciability of the related provision in GATT/WTO. This is as it should be in order to ensure that trade measures are not taken for protectionist purposes. When national legislatures and courts have a say in making such a determination, as is happening in the case of the US reciprocal tariffs taken under its International Emergency Powers Act, de-judicializing international adjudicators would require, at the very least, negotiation among the treaty parties.
The US has identified four problems that it believes that the WTO cannot address. First concerns trade imbalances. Ruing its growing trade deficit (and, by implication, China’s trade surplus), it states that the rest of the world wrongly claim that trade deficits do not matter; a country’s persistent surplus is prima facie evidence that it is externalising its distortive practices such as subsidies, wage suppression, currency policy, and labour and environmental abuses. But trade surpluses could also be a reflection of underlying macroeconomic reasons in countries, such as overcapacity and scale economies, high savings rate and low consumption in China. Moreover, the effect of reciprocal tariffs by the US this year so far has demonstrated that tariffs fail to stem bilateral trade deficit. Further, the US remained a world leader in manufacturing from the 1950s to early 2000s. Over time, it took a considered policy shift from manufacturing to services including intellectual property rights, where it now has a surplus of around USD 300 billion.
Second, it brings back the issue that overcapacity is damaging market-oriented industrial production, a systemic issue that WTO cannot address because even diligent monitoring is merely band-aid on a gushing wound. However, the GATT/WTO rules have the ability to constrain non-market operations, like action against subsidies and dumping. If there are gaps that the negotiators did envisage while drafting the rules, they can be plugged given a proper negotiating mandate.
Third, by criticising the WTO Secretariat’s comments on economic security, it brings back the issue of national security. Fourth, it states that the WTO is not a productive forum for working on supply chain resilience, as WTO stands for trade liberalisation and works towards moving production to lowest-cost location, which works against resilience. These are issues for a broader study on industrial policy rather than value chains alone, and some WTO members have already joined hands to seek a mandate to discuss it. To negotiate rules that respect true market outcomes instead of unfair competition, the US can join them and evolve a mandate agreeable to all. For the traders and businesses of its members, that kind of security and predictability is indeed what the WTO stands for.
In conclusion, the US has genuine issues with its economy and the policy toolkit deployed by it so far has not brought anticipated results. But it is naïve to blame it all on the WTO. WTO has brought about exceptionally high trade growth since it came into existence in 1995, which has contributed to global economic welfare. According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. If we look at the period from 1995 when the WTO came into force, the US export growth has matched global exports, both have quadrupled. Therefore, solution to trade concerns lies in addressing the challenges within the WTO system. As Alan Wolff, former Deputy Director General of the WTO writing four days after the US communication came, says: The United States was instrumental in creating the world trading system. Washington should not avoid dealing with the most difficult problems affecting world trade at the WTO but undertake the hard work of finding solutions through the system it created.
*Atul Kaushik is GDC Fellow at RIS. Views are personal. Usual disclaimer applies.
Author can be reached out at atul.kaushik@gdcin.org