Seven Years of WTO Appellate Body Paralysis: The World Trading System Already in a 'Lawless State' [WTO Declared End] ①

Trump Administration Accelerates WTO Paralysis
US Has Blocked New Appointments for Eight Years
No Remedies Left for Victims When Appeals Are Filed

Publication Order

<1>Seven Years of WTO Appellate Body Paralysis... The World Trade System Already in a 'Lawless State'
<2>Responsible for 98% of World Trade... Resolving Trade Disputes and Driving Economic Growth
<3>The US: From 'Key Architect' to 'Threat to Order'
<4>China, the Starting Point That Shook the WTO... The EU Is Also an Accomplice
<5>The EU's 'Plan B'... Structural Limitations Remain
<6>Every Country for Itself? New Alliances? Globalization Without the US?... The Path Forward for Korea

Editor's NoteThe World Trade Organization (WTO) has served as a key pillar of the international economic system, supporting multilateral trade order for the past 30 years. It has helped prevent illegal trade, mediate disputes, and improve living standards worldwide through trade. However, with the inauguration of the first Donald Trump administration in 2017, the WTO?once called the 'world's trade police'?lost its influence and began to drift. The WTO came to be seen as an arena without referees, raising doubts about the legitimacy and binding force of its functions. In particular, the paralysis of the Appellate Body shook the very foundation of the rules-based trade system. Eventually, the United States declared the end of the WTO after 30 years. Asia Economy examines the past and present of the WTO and, based on this, seeks to explore the changes ahead in the new world trade order. [Editor's Note]

The Appellate Body of the World Trade Organization (WTO), which has supported the global trade order, has now been paralyzed for seven years. The WTO Appellate Body serves as the final (second-instance) adjudicative organ for WTO disputes. It is composed of seven members, and at least three are required to form a quorum for each case. However, of the three remaining members, the terms of two expired on December 10, 2019, and due to the United States' refusal to appoint new members, the Appellate Body has been effectively non-functional since December 11, 2019.

With the disappearance of the last mechanism for rationally resolving international trade disputes, global trade has increasingly reverted to a 'law of the jungle' based on power. This trend has accelerated especially as the second Trump administration has once again ramped up trade pressure policies, further undermining the rules-based order of the WTO. Ultimately, Jamieson Greer, the United States Trade Representative (USTR), declared the end of the WTO system.

The WTO Appellate Body was the final authority in the two-stage dispute settlement process, reviewing legal interpretations and applications when parties appealed against panel (first-instance) rulings. However, since mid-2017, the US has refused to appoint new members, claiming that the Appellate Body repeatedly issued rulings unfavorable to US interests.

Since then, the WTO dispute settlement process has been largely incapacitated. Even when a panel issues a first-instance ruling, the losing party can simply file an appeal, preventing the ruling from becoming final, and this situation can continue indefinitely. This has led to the rapid spread of "appeals into the void" as a dispute strategy. Canada, the European Union (EU), and China have all experienced cases where, despite winning at the panel stage, the opposing party blocked finalization of the ruling through appeals.

A representative example is the additional tariffs on steel and aluminum (Section 232 of the Trade Expansion Act) imposed during the first Trump administration. The WTO panel found these tariffs to be a clear violation of WTO rules, but the US immediately appealed, delaying enforcement. As a result, the path for affected countries to seek remedies under WTO rules has been effectively blocked.

According to WTO data, as of 2024, there have been a total of 36 cases where appeals were filed after panel rulings, but only 4 of these cases (where no appeal was filed and the panel ruling was finalized) have been conclusively resolved. With the case closure rate dropping sharply, expectations for rational dispute resolution through the WTO are rapidly fading.

The Brookings Institution recently reported that "as the WTO has lost its dispute resolution function, world trade is increasingly shifting to 'power-based trade' dominated by major powers." The analysis suggests that, rather than being decided by rules and the rule of law, trade disputes are now being determined by economic and political influence, and this structure is becoming entrenched.

This trend is accelerating further with the advent of the second Trump administration. President Trump has criticized the WTO as a "failed system contrary to US interests" since his first year in office, and has recently gone beyond merely blocking restoration of the Appellate Body to demand a complete overhaul of WTO rules. In particular, he has sought to weaken the National Treatment provision by imposing requirements to buy American products, and has even pushed for revisions to WTO rules to justify protective measures for specific industries such as semiconductors and batteries.

The trade policy of the second Trump administration is unfolding around three main pillars: intensification of protectionism, proliferation of trade regulatory measures, and the incapacitation of the WTO. Compared to the first administration, this approach is considered more organized and systematic. In fact, the USTR recently stated, "WTO rules are relics of the 20th century," and that "the United States will focus on bilateral consultations based on negotiating leverage rather than on rules."

Against this backdrop, the future viability of the WTO has also become uncertain. Currently, the panel members appointed by the WTO Dispute Settlement Body (DSB) for each case have effectively ceased their activities due to the paralysis of the Appellate Body. The panel is responsible for making initial findings of fact and determining rule violations, and its role and composition are distinct from the Appellate Body, which conducts final legal reviews. The Secretariat has also failed to present a substantive roadmap for restoring the Appellate Body.

Some member states have proposed WTO reform plans, but negotiations remain stalled as the US has explicitly demanded that the powers of the Appellate Body be limited. The EU has suggested compromise measures such as strict adherence to the 90-day deadline for Appellate Body rulings and restrictions on ex officio investigations by judges, but the US has rejected these as insufficient for fundamental reform.

Amid this impasse, countries are shifting toward bilateral and plurilateral trade agreements. Whereas they previously sought to uphold multilateral trade rules under the WTO system, major countries such as the US, EU, and China are now moving to effectively rewrite the rules through their own blocs. This, in turn, is creating a vicious cycle that further erodes the influence of the WTO.

The International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have also warned in recent reports that "rising uncertainty in global trade could lead to lower economic growth rates and reduced investment." In fact, global trade growth in 2024 was only 1.2%. Moreover, with the US having declared the end of the WTO system, the prospects for restoring the WTO Appellate Body now appear slim. There remains a wide gap between the US's demand for fundamental systemic reform and the majority of member states' commitment to upholding the rules. As a result, the global trade order is likely to experience considerable turmoil in a 'lawless market' for the foreseeable future.