The United States has halted its financial contributions to the World Trade Organization (WTO), a radical change in its global trade governance policy. The action is part of the broader attempt by former President Donald Trump to reexamine financial assistance to international institutions and cut back the U.S. funding for foreign institutions.
A Blow to the WTO's Budget
The U.S. contribution would have been approximately 11% of the WTO's 2024 budget, about 22.7 million Swiss francs ($25 million).
As one of the largest contributors to the WTO's budget, this suspension could have dire consequences on the operations of the organization.
Consequences of the Suspension
By halting its contributions, the U.S. is currently in "Category 1 arrears," a condition that limits the activities and voting rights of its members in WTO organizations. This could affect the U.S.'s control over international trade policies, negotiation of trade agreements, and contribution to key decision-making processes in the organization.
Political and Economic Implications
The move is an expression of the decades-long skepticism of the WTO by some U.S. policymakers, who argue the organization has failed to crack down on unfair trade practices, particularly by China. Critics of the WTO have also decried its dispute settlement system, saying it has tilted against U.S. interests.
But some analysts of international trade warn that this step will de-legitimize the U.S.'s world power and destabilize world trade relations. They argue that pulling out of the WTO will lead to more trade disputes and uncertainty for American businesses that rely on a stable world trade climate.
What Comes Next?
While it is unclear whether the U.S. will ever resume paying again, the action questions the country's commitment to multilateral trade pacts. As global trade continues to evolve, the policy shift may encourage other nations to reassess their own contributions and involvement in the WTO.
The halt of U.S. financial backing for the WTO is a turning point in international trade relations, marking a broader movement of nationalist economic policy and distrust of international institutions. The coming months will determine if it is a temporary measure or the start of more isolationist trade policy.