1. The World Trade Organization (WTO) is the product of the General Agreement on Trade and Tariffs (GATT) which went through multiple rounds starting in 1948. Before 1995, when WTO was founded, there were rules but no dispute resolution authority.
2. The fact that the dispute resolution authority has now been crippled, by the US, does not mean WTO no longer holds as an agreement. It just means that we go back to pre-1995 when there was no formal means of adjudicating disputes over those rules.
3. How bad is that? On the one hand, it's not the end of the world. Even the dispute resolution system didn't enforce any verdicts, it just allowed countries to impose their own counter-measures to actions ruled illegal - as they used to do on their own, before it existed.
4. That said, having a formal and presumably unbiased board give a judgment and authorize retaliation carried some real weight, as most WTO members didn't want to be seen as openly flouting the rules and opening themselves to punishment.
5. The system was far from perfect. One criticism is that cases could take many years to reach a judgment, so that countries could often reap much of the benefit of breaking the rules before being forced to stop.
6. But, contrary to what President Trump repeatedly claims, the US did eventually win a large number of the cases it brought to WTO, and China did for the most part comply with rulings against it when it lost.
7. It was a tool, not a perfect tool by any means, but a useful one for some purposes. Without it, WTO rules still exist but we have one less way of making them stick.
8. Of course, it also means that WTO can't interfere with the Trump Administration's use of spurious grounds like "national security" or "currency manipulation" or even border immigration issues to impose any trade measures it wants.
9. WTO rules governing trade still exist. They haven't gone anywhere. But, as before 1995, each country will be judge and jury in its own case, which will likely lead to more tit-for-tat measures before trade disputes can be resolved.
10. In many ways, this fits with the Trump Administration's philosophy that favors bilateral bargaining over multilateral agreements. But it runs contrary to nearly 70 years of US-led institution building.
11. The other practical outcome, in the absence of a functioning dispute body, is that more countries choose to submit to arbitration, leaving the US as the (unprotected) outlier.
12. A couple of well-informed people have pointed out that I’m not quite right in saying there was no dispute resolution mechanism under GATT. Its evolution is detailed here: wto.org/english/tratop…
13. However, the analysis notes that because anyone could veto a ruling, many more sensitive disputes were never brought for a ruling, and the system began to break down in the 1970s.
