by Maya Majueran

The multilateral trading system refers to the global framework of rules and institutions that govern international trade, primarily under the WTO. It represents a collective effort by governments to create a stable, predictable and transparent global business environment.

Established in 1995, the WTO plays a central role in regulating international trade. Its primary goal is to promote and stabilize global commerce by setting trade standards and providing mechanisms to resolve disputes between countries.

Within the WTO framework, when countries commit to opening their markets to goods or services, these commitments are legally binding. For goods, this often takes the form of "ceiling" tariffs, which set maximum allowable duty rates.

The WTO's agreements are comprehensive legal texts covering a broad range of trade-related activities, including goods, services and intellectual property. These agreements are grounded in a few fundamental principles such as non-discrimination, transparency and reciprocity, which uphold the multilateral trading system.

An open and rules-based multilateral trading system is essential for global economic growth. By reducing trade barriers and ensuring fair competition, it facilitates access to wider markets, promotes investment, encourages innovation and enhances efficiency. These dynamics create high-quality jobs, especially in developing economies, and contribute to poverty reduction by raising incomes, lowering consumer prices and improving access to essential goods and services.

In recent years, however, some countries have imposed trade-restrictive measures, citing reasons like protecting domestic industries, preserving jobs, and addressing trade imbalances, national security and political or diplomatic leverage.

These restrictions have broad negative impacts, especially on developing countries. They reduce market access, raise costs, disrupt supply chains, deter investment and exacerbate inequality. Increasingly, developed nations are using trade barriers and sanctions as tools of foreign policy, often constraining developing nations' efforts to integrate into global markets, which is key to achieving the Sustainable Development Goals.

Historically, developed countries have been the principal beneficiaries of the multilateral trading system. With greater negotiating power and resources, they have shaped trade rules to reflect their strategic interests.

They advocate for liberalization in areas of strength, such as financial services, digital technologies and intellectual property, while protecting sensitive sectors like agriculture through subsidies and non-tariff barriers. When exports from Global South countries begin to threaten domestic industries in developed countries, safety, labor, or environmental standards may be strategically enforced to undermine the so-called "threats."

The U.S. administration's tariffs represent a significant challenge to the global rules-based trading system, signaling a major shift after decades of multilateral trade liberalization that has brought tariffs to near-historic lows. The imposition of tariffs on a wide range of imports marked a sharp departure from the United States' traditional role as a champion of open markets and free trade.

These measures, framed as efforts to protect U.S. industries and address trade imbalances, sparked retaliation from major trading partners, escalating tensions and leading to trade conflicts. The ripple effects were felt globally, disrupting supply chains, raising costs for businesses and consumers, and creating uncertainty in international markets.

More broadly, the protectionist stance challenged the authority and relevance of institutions like the WTO, casting doubt on the future of a cooperative, rules-based international trade framework. This may mark a critical turning point in global economic policy, with long-term implications for how nations engage in trade and economic diplomacy.

The traditional North-South economic hierarchy is being challenged. Developing nations are increasingly advancing in high-tech industries like AI, 5G, semiconductors, renewable energy and electric vehicles. Countries such as China, India, Brazil and Vietnam are making significant strides, reshaping global value chains.

In response, some developed countries are deploying tactics such as unilateral tariffs, anti-dumping duties and claims of lax labor or environmental standards. These actions, often taken outside WTO mechanisms, can be perceived as attempts to curb the technological rise and economic competitiveness of developing nations.

Developed countries often portray themselves as champions of fair trade, yet their use of unilateral tariffs against developing nations exposes a clear double standard. The Global South is increasingly aware of these contradictions, which are fostering greater unity and cooperation among developing nations in response.

Urgent reform is needed to preserve and strengthen the multilateral trading system. Multilateral cooperation must be revitalized to reflect the realities of the 21st-century economy. This includes ensuring fairer representation for developing nations, addressing environmental and labor concerns and enabling inclusive growth.

Developing countries, empowered by their growing economic influence, are poised to improve global trade rules toward more balanced and equitable outcomes. Ensuring that the multilateral system delivers mutual benefits is essential for a stable, prosperous and sustainable global economy.

Editor's note: Maya Majueran currently serves as the director of Belt & Road Initiative Sri Lanka, an independent and pioneering organization with strong expertise in Belt and Road Initiative advice and support.

The views expressed in this article are those of the author and do not necessarily reflect the positions of Xinhua News Agency.