RISKS AND OPPORTUNITIES IN THE CURRENT LANDSCAPE
University Rey Juan Carlos, Madrid, Spain
No one can doubt today the close relationship between international trade and development. In this regard, the existence of a universal multilateral trading system—based on rules, open, non-discriminatory, and equitable—constitutes one of the objectives underpinning the Sustainable Development Goals adopted within the United Nations framework. From the perspective of commercial actors, the impact of the rules derived from the World Trade Organization on their commercial activities becomes essential. The pursuit of legal certainty is essential in business, particularly in international trade. In this regard, one can distinguish between a public-legal framework and a private dimension, the latter being “regulated” by the rules of Private International Law.
To begin with, it is necessary to contextualize the functioning of the multilateral trading system. Today, the close relationship between international trade and development is beyond dispute. While economists may debate the intensity of that relationship and the varying degrees of influence exerted by the different international organizations involved in development processes, there is a broad consensus on the fundamental role that trade plays in the economic and social development of States—and, by extension, of the individuals who comprise them. Within this context, the existence of a universal, rules-based, open, non-discriminatory, and equitable multilateral trading system stands as one of the core objectives of the Sustainable Development Goals adopted under the auspices of the United Nations.
However, the path toward the current multilateral system—even in its present state of crisis—has undergone several phases. International economic relations evolved through various classical models. Thus, the mercantilism of the 16th, 17th, and early 18th centuries gradually gave way to the free trade model. Free trade emerged as a reaction against the strong protectionist stance of States towards national industries and the imposition of import restrictions.
It can therefore be argued that the international community did not possess a truly multilateral instrument for progress and peace in the sphere of economic relations until the establishment of the General Agreement on Tariffs and Trade (GATT) in 1947. Indeed, the Industrial Revolution marked a shift from an agrarian, rural economy to one that was urbanized, industrialized, and mechanized. This transformation gave rise to the notion of economic liberalism and the emergence of free trade as a means of facilitating the exchange of goods through the elimination of tariff barriers. "Free markets" and "free trade" thus became essential components of economic development and the efficient allocation of resources. What has come to be known as the "first era of globalization," underpinned by the British Empire and the gold standard, fostered the liberalization of markets and the expansion of free trade.
Nevertheless, the economic rise of the United States beginning in the 1880s, based on a strongly protectionist model, sparked concern among British merchants, who began demanding that their government increase protection against foreign competition. This marked the resurgence of the debate over protectionism and a shift toward a model of international economic relations founded on bilateralism. Between 1880 and the end of the Second World War, a recurrent tension—a back and forth—between free trade and protectionism became evident. Efforts to forge a consensus within the League of Nations to halt what Francisco Comín termed the "disintegration of international trade" proved unsuccessful, largely due to the opposition of the United States, which caused the failure of the 1933 London International Economic Conference.
At that conference—convened in response to the crisis known as the "Great Depression"—France and the United Kingdom proposed establishing a fixed parity between their respective currencies. A stable relationship among the dollar, the pound sterling, and the franc was envisioned as a mechanism to support the recovery of global trade and the world economy. However, U.S. President Franklin Delano Roosevelt had already planned the imminent devaluation of the dollar as part of his interventionist economic program, the so-called New Deal. As a result, each state began implementing its own national strategies to combat the crisis.
Following the end of the Second World War, the war economy gave way to a new model of economic cooperation, which emerged as one of the principal forms of interaction among States. This transition was significantly accelerated by the Marshall Plan, which—beyond contributing to the reconstruction of the European economy through access to capital goods, energy resources, and raw materials—also encouraged economic liberalization across Europe, beginning with the liberalization of national markets.
Although economic cooperation and economic integration are often conflated and even used interchangeably, they represent distinctly different realities. In general terms, economic cooperation seeks to reduce barriers to trade, while integration involves their elimination. Cooperation may occur between countries with vastly different structures: distinct monetary, fiscal, and social security systems, as well as divergent views on business and enterprise. Integration, by contrast, requires the harmonization of the institutional framework governing the economy. According to some scholars, economic integration currently represents the most common form of economic relations among States. In any case, integration entails the establishment of international economic organizations. This path has been followed since the end of World War II, such that—according to data from the IMF and the World Bank—there are now more than 300 Regional Trade Agreements, approximately 200 international economic organizations or agencies, and between 20 and 30 integration-oriented international organizations endowed with common institutions and involving a transfer of sovereignty.
In the current model of international economic relations, both international organizations and States are responsible for regulating the exchange of goods and services at the international level, thereby defining the public legal framework in which international trade takes place. Economic operators must be aware of these rules in order to conduct their transactions effectively, for instance, regarding the potential existence of tariffs or quantitative quotas in the destination country. What they seek is legal certainty. And this legal certainty comprises a dual dimension: on the one hand, a private dimension, governed by the rules of private international law; and on the other, a public dimension, regulated by the norms of public international law.
It is within the design of this public framework that the World Trade Organization (hereinafter, WTO) plays a fundamental role by establishing rules aimed at regulating a multilateral system of global trade.
The need to create an International Trade Organization (ITO) was first discussed during the Bretton Woods Conference in 1944. The aim was to expand international trade relations not only as a means of promoting prosperity but also as a contributing factor to world peace. The recent armed conflicts and the economic consequences of trade restrictions during the 1930s highlighted the importance of initiating a process of international economic cooperation. However, divergent approaches between the British and American delegations hampered progress. While the U.S. administration supported a fundamentally liberal position, the British made trade liberalization conditional upon the achievement of full employment[1].
To accelerate the process, the U.S. government proposed convening an International Conference on Trade and Employment and requested that the United Nations Economic and Social Council take the lead in organizing it. Prior to this, a group of fifteen countries had already begun negotiations aimed at tariff reductions, and two preparatory meetings had been held to lay the foundations for the future International Organization. During those meetings, however, the U.S. position began to grow more hesitant. The final conference, attended by 56 countries, took place in Havana between November 1947 and March 1948. It produced a draft convention known as the "Havana Charter," which, in addition to proposing the creation of the International Trade Organization, included a global trade code.
The convention never entered into force because it was not ratified by the United States, and as a result, the ITO was never established[2]. The U.S. refusal to endorse the ITO was driven by both economic and political factors, including the opposition of various domestic interest groups to the liberal trade agenda of the Truman administration, as well as the increasingly hostile political environment of the Cold War[3].
In its place, international trade would be governed for nearly fifty years by an agreement originally intended as a provisional instrument: the General Agreement on Tariffs and Trade (hereinafter, GATT). This agreement, also promoted by the United States, sought to achieve multilateral tariff reductions[4].
There was no need, therefore, for an institutional structure, as the agreement was intended to remain in force only until the entry into force of the Havana Charter and the establishment of the future organization. The GATT was signed at the Palais des Nations in Geneva on October 30, 1947, by 23 countries[5], and entered into force on January 1, 1948.
Until January 1, 1995—the date on which the World Trade Organization (WTO) officially commenced operations—eight rounds of multilateral trade negotiations had taken place under the framework of GATT[6]. It was during the eighth round, the Uruguay Round (1986–1994), that the GATT Contracting Parties agreed to establish a new organization endowed with permanence and international legal personality. The evolving political and economic circumstances of the time, the phenomenon of globalization, and the consequent broadening of the substantive scope of states' trade policy rendered the "provisional" structure created in 1947 no longer suitable to meet the new needs of its members. Both the original 1947 GATT and the outcomes of the multilateral negotiation rounds were incorporated into the new organization, the WTO, as a kind of multilateral trade acquis. Thus, the GATT was a product of its origin and its provisional nature. It was conceived as a temporary framework with a mandate limited to tariff reduction.
Formally, the Marrakesh Agreement Establishing the WTO adopts the form of an international treaty, but it has a complex structure composed of the constitutive agreement and four major annexes. Among its various functions, the WTO administers five major multilateral agreements: Trade in Goods, Trade in Services, Trade-Related Aspects of Intellectual Property Rights (TRIPS), the Dispute Settlement Understanding (DSU), and the Trade Policy Review Mechanism (TPRM). The WTO's founding agreement itself consists of sixteen articles regulating the fundamental aspects of the organization's operation, including, inter alia, its functions (Article III), the institutional structure (Article IV), relations with other intergovernmental organizations and NGOs (Article V), the decision-making system (Article IX), and the procedure for the accession of new states and customs territories (Article XII).
To shift gears—borrowing a taurine metaphor—the Sustainable Development Goals (SDGs), adopted within the framework of the United Nations, recognized the fundamental role that a multilateral trading system must play in the economic development of states. This seems, at least to some extent, to "mitigate" the legitimacy deficit and place the system within a more functional perspective.
It has been asserted that the World Trade Organization (WTO) has come to play a fundamental role beyond merely regulating international trade relations, extending into the realm of global governance[7]. This is primarily due to the economic interdependence generated among States as a consequence of economic liberalization and the expansion of the trade sphere to more sensitive sectors for States, such as trade in services, agriculture, sanitary and phytosanitary measures, and intellectual property. However, beyond the potential legitimacy crisis facing the organization, the current situation—triggered by the "trade war" initiated by the United States and the consequent blockage of the Appellate Body by the latter—appears to jeopardize not only the reconstruction of a system already weakened by the economic confrontation between the U.S. and China over the past decade but also the very viability of the WTO itself.
Indeed, in 2018, U.S. President Donald Trump announced an increase in tariffs on steel and aluminum and, perceiving that the United States was being unfairly treated by the organization, halted the renewal of the Appellate Body of the Dispute Settlement Body (DSB). The DSB, and especially its Appellate Body, whose decisions are binding, play an essential role in ensuring compliance with the WTO Agreements and trade rules.
The Appellate Body is composed of seven judges—experts in international trade—approved by consensus among the WTO's 166 members. By December 2019, only three members remained active, the minimum number required for the Body's functioning. On December 11 of that year, two of these members completed their maximum authorized eight-year terms, rendering the Body inoperative. This paralysis arose because the United States refused to endorse the appointment of new Appellate Body members during the thirty sessions dedicated by the WTO to this issue since November 2017, despite Mexico's leadership in nominating new judges. Nonetheless, U.S. skepticism toward the multilateral system predates the Trump administration, having originated during the George W. Bush administration (2001–2009) and continuing through Barack Obama's presidency (2009–2017). In this context, the European Union appeared to advocate for the creation of "Parallel Trade Courts," such as the Investment Court established under the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada.
Another noteworthy initiative, of a multilateral nature, was agreed upon in Davos (Switzerland) on January 24, 2020, between the European Union and ministers from sixteen WTO members (Australia, Brazil, Canada, China, Chile, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland, and Uruguay). This initiative launched an arbitration body conceived as a "temporary mechanism" and an alternative to the Appellate Body. It was an open alternative to the rest of the WTO members, based on Article 25 of the Understanding on Rules and Procedures Governing the Settlement of Disputes. This new mechanism was named the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). However, the MPIA has been scarcely used: 1) In October 2022, Colombia initiated an arbitration proceeding against the EU concerning anti-dumping duties on frozen French fries originating from the Union, marking the mechanism's first official activation; and 2) In July 2022, the EU secured a favorable appellate arbitration award against Turkey in a case involving discriminatory practices in the pharmaceutical sector. Although the latter case was based on an ad hoc arbitration, MPIA procedures and rules were followed.
The current situation remains precarious, considering that the blockage persists alongside an ongoing tariff conflict. In the weeks preceding March 2025, President Trump announced a 25% increase in steel and aluminum tariffs effective that month, with an additional 25% increase for Canada and Mexico. In this context, the European Commission was reportedly considering challenging the tariff increase as unlawful before the WTO Dispute Settlement Body, notwithstanding the aforementioned dysfunctions. It is important to recall that only appellate rulings are binding. Similarly, in February 2025, China filed a complaint with the WTO arguing that U.S.-imposed tariffs are discriminatory and protectionist, thereby violating multilateral trade system rules.
In a similar vein, the EU is already preparing firm and proportionate countermeasures against the United States[8].It should be recalled that the United States' conduct constitutes an international wrongful act due to its breach of agreements adopted within the WTO framework, and thus of binding international law norms. Even Brazil, a major metal exporter that initially adopted a more "tolerant" stance—entertaining the possibility of not responding despite the global economic repercussions such countermeasures might provoke—has since opened negotiations with the U.S. administration, expressing its rejection of tariff increases and adopting domestic legislative measures in anticipation of possible counteractions.
Regarding the regulation of the multilateral trade system, it is first necessary to emphasize that WTO rules are addressed to States and International Organizations operating in international trade and are therefore rules of public international law. The ability of economic operators to invoke such rules in their private legal relations is extremely limited[9]. Traders cannot invoke WTO-derived regulations, such as those under GATT 1994 or the GATS in the services sector, before domestic courts when the applicable national law conflicts with those norms.
Nonetheless, this regulation impacts private commercial activity in two ways: a) it establishes a "harmonized" public legal framework for private commercial activities by removing trade barriers; and b) it may decisively influence the shaping of so-called police laws (laws of public policy).
Indeed, legal certainty for operators in their international commercial activities has a dual dimension. On the one hand, traders must be aware of potential tariffs or quantitative restrictions when planning their businesses and negotiating contracts. This is the public dimension, regulated by public law norms. On the other hand, there is a private dimension addressed by Private International Law. In a legally fragmented world with multiple judicial systems, it is necessary to ensure the continuity of cross-border private legal relations. That is to say, it is necessary to ensure that the transactions and contracts entered into by the parties do not "collapse" upon crossing state borders. In short, the validity of contracts must extend beyond the State in which they are signed and where the delivery of goods or the provision of services, referring here to the most typical contracts in international trade, is to take place. It is precisely the need to guarantee legal relationships across space that lies at the origin of Private International Law and continues to constitute the essential element of the discipline. In this regard, the three classical pillars of Private International Law continue to provide answers to economic actors regarding: the courts with jurisdiction to resolve a potential dispute; the law to be applied by the authority responsible for adjudication; and the extraterritorial effectiveness of the decisions rendered by that authority.
If one accepts a limitation on States' international jurisdiction based on a criterion of reasonable proximity, one must also accept the extraterritorial effectiveness of judicial decisions from foreign courts[10]. Of course, there exist uniform substantive rules, both in international conventions (e.g., the 1980 Vienna Convention on the International Sale of Goods, or the Convention on the Contract for the International Carriage of Goods by Road—CMR) and in private regulations or soft law (such as INCOTERMS 2020 and the UNIDROIT Principles of International Commercial Contracts). Nevertheless, these substantive rules do not cover all sectors, may be dispositive, or ultimately rely on domestic law.
However, the rules adopted within the framework of the WTO may also affect so-called overriding mandatory provisions, as defined in Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I), thereby producing a new form of direct impact on the regulation of private-law relationships in international trade.
Indeed, an international contract is subject to a national law which, in the case of EU Member States, is determined pursuant to the aforementioned regulation. Yet, by definition, an international contract is connected to more than one State and may therefore generate negative consequences, which are commonly referred to as negative externalities. It is therefore undesirable for the contract to enjoy legislative immunity and remain entirely unaffected by the legal systems other than the lex contractus.
Specifically, Article 9 of the Rome I Regulation refers to the application of overriding mandatory provisions of the law of the forum, and to the possibility of giving effect to those of the country where the obligations arising out of the contract are to be or have been performed, insofar as those provisions render the performance of the contract unlawful. The provision does not refer to the mandatory substantive rules of the lex contractus, yet the majority of legal scholars in the field of Private International Law accept their potential application, insofar as they form part of the governing law of the contract.
The influence of WTO law on overriding mandatory provisions can be seen both in a negative and a positive sense:
a) On the one hand, by precluding the application of overriding mandatory rules where they are incompatible with the core principles of the WTO;
b) On the other hand, by serving as a justification or legitimization for their imposition in international private relationships. It is not difficult to imagine, for example, States introducing de facto restrictions on international trade through the adoption of certain environmental regulations or standards that are contrary to the principle of non-discrimination or national treatment.
It is no longer possible to carry out a theoretical analysis of the legal framework governing international trade without referring to the distinction between the public and the private spheres—between the normative framework derived from public international law, particularly that developed by International Organizations, and the private or, if preferred, the "micro-framework" governing the legal relationships established between international trade operators. Indeed, traders themselves are, ultimately, the central actors in this field, and it is upon them that the consequences of the legal rules comprising international trade law are directly or indirectly imposed.
The ultimate aim of these rules is to provide sufficient legal certainty to encourage the formation of private-law relationships of an economic nature. Once again, it is not the legal status of the party that determines the nature of the legal relationship, contract, or transaction, but rather the capacity in which the party acts. Where a public entity, administration, or publicly owned corporation acts as a private party—devoid of sovereign prerogatives—the relationship is to be characterised as a private-law relationship within the sphere of international trade. However, this is by no means a novel conclusion; rather, it is one of the classical premises of Private International Law.
What is more innovative is the contemporary manner in which legal relationships of an economic nature within international trade are regulated—in other words, the modern approach to overcoming the longstanding challenges arising from the coexistence of multiple national legal systems and domestic courts within an increasingly global society, and, above all, the extreme difficulty in regulating such private relationships in a truly global manner.
This is undoubtedly a defining feature of international trade law: the apparent failure of uniform law in the classical sense—that is, of normative instruments adopted by groups of States or within international organisations with the intention of being binding and universally applicable. Perhaps the most advanced manifestation of such efforts is the law emerging from economic integration processes. However, a more in-depth analysis would lead to the conclusion that, despite the existence of numerous ongoing economic integration initiatives, there has not yet been sufficient legal integration of cross-border private-law economic relationships.
This is not the place for a detailed discussion of this issue, but even a brief review of European Union legislation reveals this apparent failure. Various attempts to establish a European contract law have been unsuccessful, at least in achieving a binding and uniform legal framework.
A different matter—and one which has been noted—is the perspective of a global law based on the principle of party autonomy. This principle is increasingly viewed not only as a powerful tool for self-regulation but also as a means of norm generation, grounded in the knowledge and experience of the parties themselves. From this latter perspective, the conclusions we reach are far from pessimistic.