For three decades, the World Trade Organization has refereed global trade. Here’s how it works, how it helped Australia in its trade fight with China, and why it has struggled to keep up.
The World Trade Organization, or WTO, is the international body that deals with the rules of trade between countries. It was created in 1995, replacing the General Agreement on Tariffs and Trade, or GATT, which had governed trade since 1947.
It’s based in Geneva, Switzerland, and has 166 members, covering almost all of world trade. Australia was a founding member.
The rules
WTO agreements cover trade in goods, services and intellectual property.
The most important principle is known as “most favoured nation”. In general, a country can’t give one trading partner a better deal, such as a lower tariff, without offering it to every other WTO member. There are exceptions, including free trade agreements, which let groups of countries cut tariffs between themselves.
Another principle is “national treatment”: once imported goods have entered a country, they should be treated the same as locally made goods.
Members also commit to limits on their tariffs, known as bound rates, and to being transparent about their trade rules.
Settling disputes
One of the WTO’s main roles is to settle trade disputes. If a country believes another is breaking the rules, it can bring a case. A panel of experts hears the case and makes a ruling, which can be appealed.
Australia has used the system. When China imposed tariffs of around 80% on Australian barley in 2020, and more than 200% on Australian wine, Australia took both cases to the WTO. The disputes were resolved in 2023 and 2024, as relations improved and China removed the tariffs.
A weakened referee
The WTO has struggled in recent years.
Since December 2019, its Appellate Body, the final court of appeal for disputes, hasn’t been able to hear cases, because the U.S. has blocked the appointment of new judges. The U.S. argues the body overstepped its role. That means a country that loses a case can appeal “into the void”, leaving the dispute unresolved. Some members, including Australia, have set up a temporary alternative appeal arrangement among themselves.
Negotiations on new global trade rules have also largely stalled, because all members must agree.
The rise of tariffs, including the sweeping tariffs imposed by the U.S. since 2025, has raised further questions about the WTO’s ability to enforce the rules. The U.S. has argued many of its tariffs are justified on national security grounds, which WTO rules allow.
Supporters say the WTO still provides a valuable rulebook that keeps most of the world’s trade flowing. Critics argue it needs major reform to remain relevant.
