- The great unraveling: With the demise of its arbitration mechanism, the World Trade Organization (WTO) – the key enabler of 70 years of prosperity and a rules-based economic order – may also become defunct. In the best case, after a lapse of six to 24 months, a new arbitration mechanism with a much-reduced mandate and a reformed, but also diminished in scope and authority, WTO may emerge. But universal rules and enforcement will be less important in shaping the terms of trade than large countries using their market size to weaponize trade via tariffs. Meanwhile bilateral and multilateral preferential trade arrangements will take on more importance in shaping rules. The latter group – often excluding the United States – could become the new normal for global trade.
