With an outdated set of rules and dysfunctional working practices, the World Trade Organization (WTO) finds itself in a “whatever it takes” moment. Geopolitical tensions and the COVID-19 crisis have exacerbated its problems. WTO rules were designed to regulate trade between private firms that only pursue profits. But China’s firms have been prospering using a corporate governance model in which policy objectives are mingled with purely commercial interests, compounding suspicions about the consistency of China’s economic policies with the spirit (if not the letter) of WTO rules.
However, due to the COVID-19 crisis, Group of Seven (G7) governments — whose previous role in the economy was mostly that of ensuring the enforcement of contracts and the functioning of markets — now actively support the private sector with massive fiscal and monetary support. According to the International Monetary Fund, in 2020, rich countries’ fiscal support to the economy was, on average, about 24 percent of their GDP. On top of this, central banks’ massive monetary assistance has kept interest rates at record-low levels. In 2020, the Federal Reserve Bank’s balance sheet soared from 20 percent to 35 percent of the United States’ GDP, whereas the European Central Bank’s balance moved from 40 percent to 60 percent of the euro zone’s GDP.As a result, all governments (not just China’s) are actively involved in supporting private businesses. The WTO has a fortuitous opportunity to initiate discussions to update rules on state intervention in the economy. The most severe impact is seen at the global level where we are witnessing the trends in global trade which are way worse than the Great Depression of the 1930s and the Economic Crisis of 2008. At the macroeconomic level, the production and consumption patterns are on a downward spiral. A new paradigm shift is under process and there is a need to look at the defining aspects of globalisation and trade through the prism of COVID-19.
Thus, the present paper discusses the challenges facing the WTO in a post-Covid era wherein its influence as the only global multilateral trade body is dwindling and offers suggestions/solutions for WTO Reform so as to stay relevant in the post-Covid world which will require a multi-faceted approach.