A new report by several experts for the Bertelsmann Foundation was warned that the credibility of World Trade Organisation's (WTO) is under major threat - the body faces extinction in light of the trade war between the USA and several other countries.
While the trade war has already engulfed the US and China, other nations are on the brink of following and effectively destroying the system that has governed international trade since 1995.
Donald Trump, last month imposed tariffs on Chinese goods in what he said was protection against Beijing's trade abuses. Following a retaliation by China, Trump has now threatened additional tariffs that total close to $500 billion, nearly the entire amount of US imports from China. That has got China back threatening more tariffs on the US.
Lead by Bernard Hoekman, an economist at the European University Institute in Florence, 14 experts have urged the all 164 members of the WTO to agree on a new work programme in order to preserve the rule-based multilateral trading system. Else trade-distorting policies could destroy the international trading system, they warn.
"Sticking to status quo modes of operating is a recipe for the institution's gradual demise," they said in the report, "Revitalizing Multilateral Governance at the World Trade Organization".
The report went on to add that "It is urgent to avoid further erosion of the WTO's credibility," saying "This includes preventing backsliding by WTO members towards the unilateral use of protectionist trade policies and ensuring that disputes are resolved effectively and efficiently."
In response, WTO director general Roberto Azevedo welcomed the "very timely" report.
The WTO faces collapse after the United States told the organisation last week that the "reckoning" over China's unfair trade policies is urgent and is too big for the WTO to handle. Since the US has cited national security to invoke the tariffs, there is little the organisation can do.
The experts said that problems go beyond the failure to conclude the WTO's stalled Doha round, launched in 2001, with some national policies distorting trade and threatening to undermine the system.
Such measures create systemic risks given the prospect of a tit-for-tat imposition of trade-distorting measures and greater use of national security justifications by WTO members for the imposition of protectionist measures," it said.
The US isn't alone, with both China and India stating that they feel the WTO is unbalanced and treats them unfairly. All this has caused the organisation to lose credibility, with more than 400 preferential trade agreements signed since 2000.
Under Trump, the United States has demanded that the WTO's dispute system is changed to stop Washington from getting what he regards as an "unfair deal". Trump has exercised his rights to block appointments to the WTO's appeals chamber to replace judges as their terms expire.
If the matter isn't resolved by September, the body will be down to just three members, which is the minimum required to consider an appeal. It could end up collapsing by the end of 2019 when the other three member's terms expire.
