WTO Marginalized As EU–US Trade Deal Signals Shift Away From Multilateralism

As world leaders praised Sunday's long-awaited trade agreement between the European Union and the United States, one international institution was conspicuously absent from the conversation: the World Trade Organization. Once considered the crown jewel of post-war economic cooperation, the WTO was neither mentioned in the joint press statements nor acknowledged in the deal's architecture.

According to Reuters, the agreement was reached bilaterally between Washington and Brussels after months of high-stakes negotiations that excluded WTO channels entirely. No appeals were filed. No dispute panels convened. The world's largest and most complex trade relationship was renegotiated without a single nod to multilateral frameworks.

This silence may be more than symbolic. It may mark the functional end of an era.

From Keystone to Bystander

Founded in 1995 to enforce rules-based trade and reduce global economic friction, the WTO has been increasingly sidelined over the past decade. The Trump administration's first term set the tone by blocking judicial appointments to the WTO's Appellate Body, effectively paralyzing its dispute resolution system. Despite efforts by the Biden administration to revive the mechanism in the early 2020s, Washington never fully re-engaged.

As reported by Politico, the recent EU–US agreement was designed explicitly outside the WTO framework. While it technically complies with WTO rules, it does not reinforce or utilize them. Instead, it rests on reciprocal tariff ceilings, bilateral enforcement, and informal political guarantees.

"It's a gentlemen's agreement dressed up in trade language," said one former WTO official quoted by Politico. "And it works—until it doesn't."

A Broader Shift Toward Bilateralism

The EU–US deal is not an isolated case. As noted by The Financial Times, the global trading system is increasingly being rebuilt through ad hoc pacts, plurilateral alliances, and regional compacts. The WTO, with its 164 members and consensus-based structure, struggles to adapt to this faster, more fragmented reality.

Recent trade moves—such as India's steel quota deals with Japan, the U.S.–Taiwan chip agreement, and the Australia–EU green hydrogen pact—have all bypassed multilateral mechanisms. These deals represent a more pragmatic, and in some ways more political, turn in trade diplomacy. They are quicker to implement and easier to enforce, but they erode the universality of the WTO's mandate.

A Shrinking Enforcement Role

The WTO's Dispute Settlement Body has been effectively inoperative since late 2019 due to a lack of appellate judges. According to the Peterson Institute for International Economics, over 30 unresolved cases now sit in legal limbo, with members increasingly resorting to retaliation or informal arbitration.

The EU–US deal does not propose a joint dispute mechanism or refer to any third-party arbitration body. Instead, it establishes a "mutual review council" composed of senior trade officials who will meet quarterly. The arrangement mirrors recent deals struck by China and Russia with regional partners—arrangements that, while functional, lack neutrality or legal recourse.

The WTO's Structural Irrelevance

A recent report by the European Centre for International Political Economy concluded that the WTO is "no longer the focal point for global trade governance." The report cited delays in reform, growing U.S. skepticism, and China's pivot to the Global South as key reasons for the organization's declining relevance.

Even reform efforts have stalled. A 2024 proposal by Brazil, South Korea, and the EU to revive appellate functions failed to gain traction. Meanwhile, climate-linked trade measures—like carbon border adjustment mechanisms—have moved ahead without WTO authorization, creating further fragmentation.

Multilateralism's Invisible Collapse

The EU–US agreement is notable not only for what it includes—tariff caps, joint supply chain targets, and cross-investment pledges—but also for what it omits. There is no shared language about WTO norms, no recommitment to rules-based trade, and no plan to modernize or repair the global system.

As The Guardian observed in its coverage, the deal represents a pragmatic response to current political realities rather than a principled stand on global governance. It offers predictability—but only for those in the room.

What Happens Next?

The implications of this shift are significant. For smaller economies, multilateralism offered protection, leverage, and a voice. Without it, they face a world of fragmented trade blocs where power, not precedent, determines outcomes. For global businesses, the rise of regional deals means more complexity, more paperwork, and less legal certainty.

Even the WTO's supporters are growing skeptical. Ngozi Okonjo-Iweala, the WTO's Director-General, acknowledged in June that "the institution risks marginalization if members continue to prefer side deals," as reported by Euractiv.

The EU–US trade deal may offer short-term economic stability and diplomatic alignment. But in doing so, it also highlights the near-total exclusion of the one organization built to manage trade disputes and defend smaller players.

This is not a formal exit from the WTO. It is something quieter, but more enduring: a loss of faith, a shift in behavior, and the normalization of fragmentation. If this trend continues, the WTO won't be abolished—it will simply be forgotten.