Recent Dispute Settlement Dynamics at the WTO and the Attraction of RTAs

Abstract

The multilateral trading system under the World Trade Organization (WTO) is experiencing unprecedented stress. The paralysis of the Appellate Body and the rise of unilateral tariff wars have weakened the predictability and authority of multilateral trade governance. In response, states are increasingly turning to regional trade agreements (RTAs) as functional substitutes, relying on their dispute settlement provisions to fill the enforcement gap left at the WTO. This article examines how the WTO’s crisis has shaped the design and use of RTA dispute settlement systems. It shows how recent RTAs have adopted features such as exclusive forum clauses and broader regulatory coverage, including environmental, labour and digital economy considerations. Drawing on a comparative analysis of RTAs, the article argues that while regionalisation risks further fragmentation, it can also generate models and momentum for WTO reform.

JEL Codes: F13, F15, K33, F02, F53

Introduction

The global trading system is navigating its most uncertain period in the post–Second World War history (Hoekman & Mavroidis, 2021). For almost three decades, the World Trade Organization (WTO) has provided a relatively stable and predictable forum for resolving disputes among its members. This institutional reliability was largely rooted in the strength of its two-tier dispute settlement system, which included a standing appellate mechanism, the Appellate Body. The WTO dispute settlement system has often been described as the ‘crown jewel’ of the multilateral trading system. ¹ However, since late 2019, the Appellate Body has largely remained non-functional, owing to the United States’ continued refusal to approve the appointment of new members to replace those whose terms have expired, effectively leaving the WTO without its highest adjudicatory authority (World Trade Organization, 2020, p. 122). This crisis has not occurred in a vacuum. Trade tensions escalated sharply with the United States–China tariff war in 2018 and culminated more in 2025 with the reimposition of sweeping tariffs by the Trump administration (Bown, 2025). These developments have not only reignited retaliatory trade measures but have also undermined confidence in the WTO’s capacity to resolve disputes and enforce its rules.

The paralysis of the WTO dispute settlement system, combined with the rise of protectionist policies, has prompted many states to pursue regional trade agreements (RTAs) more actively (Dadush & DominguezProst, 2023; Xu et al., 2024). RTAs are hardly new; they predate the WTO and proliferated in the 1990s and 2000s, but their role has expanded in recent years. Then WTO Director-General Roberto Azevêdo warned in 2014 that RTAs were growing much more rapidly than during the GATT era, with an average of 24 RTA notifications per year since 1995 (compared with 3 per year under GATT) (Azevêdo, 2014). According to WTO data, there are currently 376 RTAs notified and in force, and 61 RTAs in force which have not yet been notified (World Trade Organization, 2025). Some even argue that the proliferation of RTAs has made what were meant to be exceptions to most favoured nation (MFN) preferential trade concessions among a subset of countries into the rule rather than the exception in world trade (Lee, 2015). This tension—between RTAs advancing liberalisation and new regulatory rules in some areas while undermining the universality of WTO norms—lies at the heart of the current debate. In this environment, regional and bilateral trade agreements are increasingly viewed not just as complementary but also as practical alternatives to multilateralism (Azevêdo, 2014; Chaisse & Hsieh, 2023).

Most contemporary RTAs include dedicated dispute settlement mechanisms, often modelled on the WTO’s system (Chase et al., 2013). Traditionally, however, RTA dispute fora were seldom invoked (Vidigal, 2017); states still preferred to bring their trade grievances to the WTO’s universally binding system. Indeed, even in the prime of RTA proliferation, one in five WTO disputes involved countries that were RTA partners, meaning they bypassed the regional forum in favour of Geneva (Azevêdo, 2014). This highlights the primacy the WTO dispute settlement system once held due to its enforcement power and multilateral legitimacy. The landscape is now undergoing a significant shift. With the WTO dispute mechanism impasse, RTAs can act as functional substitutes for advancing trade rules and resolving disputes. These agreements now often include their own dispute resolution mechanisms and thus offer a degree of legal certainty and enforcement that is currently missing at the multilateral level. This shift raises serious questions about the long-term coherence and resilience of the global rules-based trading order.

Within this context, this article explores three interrelated questions. First, are states increasingly turning to RTAs with dispute settlement provisions to resolve their trade disputes, given the paralysis of the WTO’s Appellate Body? Second, how is the WTO crisis influencing the design of dispute settlement mechanisms in new RTAs? In other words, the article aims to address the broader question of whether RTAs are adapting their dispute resolution features in light of the multilateral system’s shortcomings. Third, how might the WTO system be informed by the design and implementation of regional dispute settlement mechanisms? The article aims to answer these questions by analysing several recent agreements at the forefront of the regionalisation trend, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a mega-regional agreement spanning Asia and the Americas and, more recently, Europe through the accession of the United Kingdom; the Regional Comprehensive Economic Partnership (RCEP), a mega-regional agreement centred on Southeast and East Asia, including China; the Digital Economy Partnership Agreement (DEPA), an innovative plurilateral framework on digital trade; and the European Union’s new digital trade agreements and partnerships, exemplified by the European Union–Singapore Digital Trade Agreement.

The article is structured as follows: the second section provides a brief review of the WTO dispute settlement paralysis and recent tariff wars, explaining how these developments have eroded multilateral norms and created incentives for regional solutions. The third section discusses the rise of RTAs as functional substitutes, examining how countries increasingly rely on them to achieve liberalisation and advance rules stalled at the WTO. The core of the analysis is presented in the fourth section, which evaluates whether the WTO’s challenges are driving greater regionalisation in dispute resolution, focusing both on the uptake of regional fora and on how new RTAs may be designed differently in light of the WTO crisis. The fifth section examines the implications for the multilateral trading system, critically analysing the consequences for global rule coherence, inclusivity and the future role of the WTO. It also offers ideas for reforming the multilateral dispute settlement system, drawing on the design features of new RTAs. The last section concludes.

The WTO Dispute Settlement Paralysis, Tariff Wars and the Erosion of Multilateral Norms

The WTO dispute settlement mechanism—and its credibility—have historically been regarded as a cornerstone of the multilateral trading system and an inspiration for systems of dispute resolution in other fields of international economic law (Sacerdoti & Moran, 2025). In particular, the establishment of the Appellate Body after the Uruguay Round was seen as a landmark development in giving legal certainty and predictability to international trade relations (Petersmann, 1997). The mechanism offered a binding, quasi-judicial process that operated with a high degree of professionalism and was widely respected by the member states. However, over the past decade, the system has entered a state of institutional paralysis. This breakdown was neither sudden nor entirely unexpected. US concerns about the Appellate Body’s functioning had been expressed as early as the Obama administration. These critiques intensified under President Trump, culminating in the decision to block all new appointments to the Appellate Body. By December 2019, the Appellate Body could no longer function due to a lack of quorum. The stated US rationale centres on the perceived judicial overreach, delays in issuing reports and the alleged creation of new obligations not agreed upon by WTO members (Gao & Zhou, 2019).

The consequences of this impasse have been profound. With no functioning appellate mechanism, the WTO dispute settlement mechanism has lost much of its authority and reliability (Hughes, 2023). For countries embroiled in trade disputes, especially in politically sensitive sectors, the absence of a binding resolution has made WTO litigation a far-less-attractive route. This institutional vacuum has further enabled a resurgence of unilateral trade measures, particularly by the United States. The imposition of tariffs under Section 301 of the Trade Act of 1974 in 2018 signalled a new era of unilateral trade policy. The tariffs initially targeted China but soon expanded to include strategic US allies. The response from trading partners was swift and retaliatory. Although these measures were legally challenged before the WTO (Dimitropoulos, 2023), the lack of an appellate path rendered any panel rulings effectively unenforceable. The return of President Trump to office in 2025 marked a second wave of US tariffs more generally, as well as more specifically on steel, semiconductors and electric vehicles originating from China, the European Union and beyond. The escalation has renewed fears of a full-blown trade war.

As WTO Director-General Ngozi Okonjo-Iweala has observed, recent geopolitical and economic developments ‘have led many to conclude that global trade and multilateralism—two pillars of the WTO—are more threat than opportunity’ (Okonjo-Iweala, 2022). Not surprisingly, these developments have sparked a renewed interest in bilateral agreements and RTAs. Countries are increasingly viewing RTAs not just as tools for trade liberalisation but also as functional substitutes for a multilateral system in crisis.

The Rise of RTAs as Functional Substitutes

The ongoing paralysis of the Appellate Body has not only undermined the credibility of the multilateral dispute settlement system but has also triggered a broader change in trade diplomacy. In the absence of a reliable multilateral forum, states are increasingly turning to RTAs as functional substitutes and legal fallback mechanisms for dispute resolution. This has resulted in a complex web of preferential arrangements spanning the globe. What distinguishes the current development is not merely the volume of RTAs but also the deliberate emphasis on robust dispute settlement mechanisms within most of them. Many RTAs now include procedures that resemble those used in the WTO, such as consultations, panels as well as sometimes appeal-like reviews. Unlike the stalled system in Geneva, these regional systems offer a working forum and enforceable process (Hoekman & Mavroidis, 2021). As a result, RTAs are now seen as offering more certainty and reliability when it comes to settling disputes.

This shift is evident in India’s evolving trade strategy, for example. India has recently pivoted towards regional and bilateral engagements, including renewed negotiations with the European Union and the United Kingdom. Negotiations with these partners, which had previously been sluggish, gained traction after the WTO Appellate Body crisis, as India sought greater regulatory flexibility and sensitivity to developmental needs in its trade rule-making and dispute settlement positions (Sharma, 2025). At the same time, the Indian government is willing to accede only to RTAs that accommodate its concerns over regulatory autonomy and protect vulnerable domestic sectors, particularly agriculture. India’s withdrawal from RCEP in November 2019 underscores this stance (Chakraborty & Chaisse, 2021). This stance towards RTAs also informs and is reflected in India’s engagement at the WTO: rather than abandoning multilateralism, India remains committed to it while firmly rejecting plurilateralism and the incorporation of plurilateral agreements into the WTO framework (Manak, 2025). In doing so, India appears to be recalibrating its participation in international trade governance—regional as well as multilateral—to better safeguard its national interests and regulatory priorities.

Further, issues like digital trade, which had no agreed WTO rules until very recently, are now fully addressed in many RTAs (Burri, 2023). For example, the CPTPP contains chapters on digital trade, state-owned enterprises, labour and the environment, areas where WTO rules are minimal or absent (Burri & Kugler, 2024). Similarly, the RCEP, signed in 2020 by 15 Asia Pacific nations, includes e-commerce, intellectual property, competition and even cooperation on small and medium-sized enterprises among its topics, in addition to tariff elimination on goods. This broader scope means RTAs can function as ‘laboratories’ for rule-making as well as more generally testing new ways of engaging in international economic governance (Linscott, 2022). Countries are using regional deals to experiment with new trade rules and disciplines that they either could not agree on at the WTO or did not attempt to negotiate multilaterally due to expected resistance. A positive view of this phenomenon is that RTAs can pioneer approaches that later inspire or inform multilateral rules. For the WTO, RTAs may thus operate as building blocks rather than stumbling blocks (Linscott, 2022).

RTAs have thus begun to serve a triple function: they provide more predictable and stable legal environments; they serve as platforms for states to exert greater influence over the formulation and enforcement of trade rules; and they offer models for the future design of the multilateral system, for instance, by incorporating emerging issues such as sustainability and the digital economy.

However, despite these functions, RTAs do not represent full alternatives to the WTO. Major trade flows—such as those between the European Union, the United States and China, as well as between the European Union and the United States—remain outside the scope of most RTAs. At the same time, the turn towards RTAs does not necessarily signal an abandonment of multilateralism. Rather, it reflects a pragmatic response to the WTO’s enforcement paralysis, as states seek complementary mechanisms to address emerging trade issues and, in many cases, to secure binding dispute resolution elsewhere. Even the United States, despite its role in precipitating the Appellate Body crisis and the critique of the WTO, has not withdrawn from the WTO and continues to engage with the organisation. Similarly, most countries—including India, as discussed earlier—continue to value WTO membership, particularly for its normative legitimacy and global reach. What has shifted is their willingness to rely exclusively on a multilateral system that can no longer guarantee either their developmental priorities or effective rule implementation. RTAs, therefore, are increasingly becoming intentional and strategic venues for trade governance, filling the institutional vacuum left by a multilateral system struggling to perform its most celebrated functions.

Regionalising Trade Disputes

Faced with the difficulty of achieving consensus among WTO members, states have pursued deeper integration through mega-regional agreements and innovative sectoral deals at the regional level. Agreements such as CPTPP and RCEP illustrate this shift, offering state-to-state dispute settlement mechanisms that, while inspired by the WTO Dispute Settlement Understanding (DSU), adapt procedures to the political and economic contexts of their members (McRae, 2019). This allows parties to avoid some of the WTO’s structural deadlocks while retaining the legitimacy of rules-based adjudication. The regionalisation of trade disputes has two dimensions: first, a forum shift, with countries increasingly bringing their disputes to regional bodies rather than to Geneva; and second, a systemic shift, as RTAs establish dispute settlement mechanisms that either mirror or diverge from the WTO model.

Qualitatively, the political motivation to include binding dispute settlement in RTAs is clear: if a government cannot assure its domestic stakeholders that a WTO case will bring relief because the opponent can block it by appealing, that government will look for alternative enforcement avenues. Article 23 requires WTO members to use the WTO DSU to seek redress of WTO violations. Many of the newest RTAs include ‘exclusive forum’ clauses to manage overlap with the WTO. An exclusive forum clause requires a complaining party to choose either the RTA’s dispute settlement mechanism or the WTO for a given complaint, and that choice is then final (Graewert, 2008). Such clauses prevent double litigation of the same issue. ²

The question of forum choice cannot be fully addressed without considering the WTO’s jurisprudence on the relationship between WTO law and RTA commitments. Several landmark cases provide guidance. In Turkey—Textiles (World Trade Organization, 1999), the Appellate Body held that the GATT Article XXIV defence for measures taken under a customs union or free trade area requires meeting strict necessity and coverage requirements; regional commitments do not automatically justify WTO-inconsistent measures. In Mexico—Soft Drinks (World Trade Organization, 2006), the panel and Appellate Body rejected Mexico’s attempt to rely on North American Free Trade Agreement (NAFTA) dispute settlement provisions to exclude WTO jurisdiction, confirming that WTO members cannot contract out of their WTO obligations through RTAs. In Brazil—Retreaded Tyres (World Trade Organization, 2007), the Appellate Body similarly dismissed Brazil’s reliance on a Mercosur exemption, underscoring that RTA commitments cannot override WTO rules unless justified under WTO law (e.g., GATT Article XXIV). Finally, in Peru—Agricultural Products (World Trade Organization, 2015), the Appellate Body reaffirmed that WTO panels retain jurisdiction notwithstanding the existence of an RTA. It clarified that Article XXIV GATT does not function as a conflict-of-jurisdiction rule, but as a conditional justification to be assessed within WTO dispute settlement, thereby preserving the primacy of the multilateral system (Zang, 2019). Taken together, these cases reflect the consistent position within the WTO that RTAs remain subordinate to the multilateral trading system: forum selection or substantive provisions in RTAs cannot be invoked to circumvent WTO rights and obligations.

In the past, because the WTO dispute settlement mechanism was perceived as stronger and more predictable, complainants often avoided pursuing cases under RTAs (Vidigal, 2017). Today, however, with the WTO’s Appellate Body being non-functional and the broader system facing legal and political uncertainty, complainants increasingly activate RTA dispute settlement provisions instead, thereby precluding recourse to the WTO. The number of disputes adjudicated under RTAs remains limited compared with WTO proceedings; emerging case practices demonstrate, though, that states are increasingly willing to activate regional dispute settlement mechanisms. This dynamic was evident in the dairy quota dispute under the CPTPP. This was a market-access case in which New Zealand initiated proceedings against Canada in 2022 concerning the allocation of tariff-rate quotas (TRQs) for dairy products. Following unsuccessful consultations, a panel established under Chapter 28 issued its final report on 5 September 2023, finding that aspects of Canada’s TRQ administration were inconsistent with CPTPP commitments. In 2024, Canada introduced technical adjustments to its TRQ procedures to implement the ruling (CPTPP Chapter 28 Panel, 2023). In this case, regional adjudication delivered enforceable market-access outcomes, functioning as a practical alternative to WTO dispute settlement during institutional paralysis. As highlighted earlier, New Zealand’s initiation of a CPTPP case against Canada locked it into that forum, as CPTPP Article 28.4 contains an exclusive forum-selection clause.

While regional dispute settlement mechanisms were historically underutilised (Vidigal, 2017)—with the notable exceptions of the European Union and the NAFTA ³ —and although the overall number of RTA disputes remains low, an emerging upward trend is observable, and specific agreements are beginning to be actively used. Besides the above-mentioned case, another case between two traditional partners is worth mentioning. Under the European Union–Republic of Korea Free Trade Agreement, a panel of experts was convened in 2021 following the European Union’s complaint that Korea had failed to comply with its labour commitments under the Trade and Sustainable Development chapter (European Union–Korea Free Trade Agreement Panel of Experts, 2021). The panel concluded that Korea had not made sustained efforts to ratify core International Labour Organization (ILO) conventions and identified inconsistencies in domestic labour legislation. In response, Korea ratified three fundamental ILO conventions in April 2021 and subsequently amended relevant labour laws. This illustrates how RTA dispute settlement mechanisms are now being used to enforce broader regulatory objectives included in RTAs beyond traditional market-access rules, including labour standards and sustainability. Finally, although RCEP includes a dispute settlement chapter, to date, there are no publicly available panel rulings under RCEP. Still, China has reportedly ‘strongly embraced’ RCEP’s dispute settlement Chapter 19, and it is expected that if disputes arise between China and other RCEP members, such as Japan or Australia, they may potentially opt to use the RCEP mechanism (Aronofsky, 2024, p. 361).

From a legal design perspective, the main question is whether new RTA dispute settlement mechanisms are modelled after the WTO DSU or are innovating to avoid its pitfalls. A review of some important recent agreements shows both continuity and some noteworthy deviations. CPTPP’s Chapter 28 on dispute settlement is primarily modelled on the WTO DSU and NAFTA. It provides for consultations, then an ad hoc arbitral panel, whose rulings are binding. There is no appellate review, just like almost all other RTAs (Aronofsky, 2024). Drawing on the experience of a now-defunct Appellate Body, the CPTPP’s lack of an appellate mechanism can be seen as an advantage, since there is no risk of an appeal into the void. CPTPP also incorporates many WTO dispute settlement design principles. For example, it explicitly states that panels should interpret the agreement in accordance with the customary rules of treaty interpretation and the relevant WTO law, where applicable. ⁴ This indicates an effort to maintain coherence with WTO jurisprudence, rather than create conflicting interpretations. One significant difference in CPTPP is the scope of covered issues. It explicitly allows its dispute settlement mechanism to enforce not only traditional trade chapters but also chapters on labour, environment and anti-corruption (Aronofsky, 2024). This goes beyond the WTO, which has no direct jurisdiction over labour or environmental matters—except when such issues arise indirectly through disputes involving general exceptions. Thus, the CPTPP’s dispute system is innovative, as it incorporates social and regulatory issues into the binding dispute resolution mechanism.

RCEP’s Chapter 19 on dispute settlement is similar in structure to the CPTPP, involving consultations, a panel and no appeal. RCEP was concluded in 2020, when the Appellate Body crisis was already evident; however, it largely followed existing free trade agreement (FTA) templates rather than breaking new ground. It strives for compliance through implementation or compensation, and allows retaliation as a last resort, much like the WTO. One notable element is that RCEP provides for a strict exclusive forum clause in Article 19.5. If a dispute can be brought under both RCEP and the WTO, once a party chooses one forum, it cannot use the other. This clause was designed to prevent double-dipping and conflicting rulings. Under WTO conditions prior to 2020, many countries would have defaulted to the WTO. However, now RCEP members may be more inclined to utilise the RCEP system, especially for intra-Asia disputes. Finally, RCEP omits any appellate stage, and like CPTPP it has no permanent dispute settlement forum. This may reflect caution shaped by the Appellate Body controversy, favouring arbitration-style ad hoc panels that remain closely linked to state consent, rather than a standing court capable of developing its own jurisprudence.

The DEPA, signed in 2020, is a pioneering agreement among Chile, New Zealand and Singapore, with South Korea joining in 2021, dedicated to digital trade. DEPA is a flexible and evolving instrument (Dimitropoulos, 2025; Elms, 2020; Soprana, 2021). DEPA’s Module 14, the agreement’s dispute settlement mechanism, embodies the same approach to digital trade governance found in CPTPP and RCEP. The module establishes a state-to-state dispute resolution framework, including arbitration for binding decisions when consultations fail, though operational details such as panel composition and timelines remain under development. This reflects DEPA’s design as an agreement adaptable to the digital economy’s rapid changes. Currently, members may rely on the dispute settlement provisions of existing FTAs between them as a practical interim measure. The WTO’s difficulty in moving digital trade talks forward either under the Work Programme on Electronic Commerce or the Joint Statement Initiative on E-commerce, likely encourages DEPA members to strengthen the credibility of the agreement by ensuring that its provisions are enforceable. While some DEPA modules—particularly those on data flows and e-commerce—are not yet fully subject to dispute settlement, ongoing accession negotiations suggest gradual movement towards broader enforceability. Notably, Annex 14-B introduces mediation to promote cooperative dispute resolution, complementing arbitration and contrasting with the WTO’s more adversarial process. This dual approach illustrates how RTAs in cutting-edge fields might often begin with flexible, non-binding mechanisms before strengthening commitments as cooperation deepens and mutual confidence grows.

The European Union’s Digital Trade Agreements and Partnerships provide insightful case studies on the design of new RTAs and in new trade areas. For example, the European Union–Singapore Digital Trade Agreement, concluded in 2023, rather than creating a new mechanism, anchors itself to the existing FTA’s dispute settlement mechanism. According to the European Commission, ‘dispute settlement mechanisms laid down in the Free Trade Agreement apply to the Digital Trade Agreement as appropriate’ (European Commission, 2024). This means that if either party fails to uphold their digital trade commitments, the other can invoke the state-to-state arbitration panel process established in the 2019 European Union–Singapore FTA. The European Union likely adopted this approach to ensure that the digital trade rules are enforceable without having to negotiate entirely separate procedures. It also signals the European Union’s commitment to making digital trade rules not merely cooperative dialogues, but rather binding obligations backed by potential sanctions in the event of a breach. The European Union has similarly negotiated a digital trade chapter with the Republic of Korea, concluded in March 2025, and is in talks with Japan on a digital partnership. The European Union and South Korea also agreed to deepen their 2010 FTA mentioned above by establishing a new specialised committee on emerging trade and economic issues (European Commission, 2025). In cases where an FTA already exists (e.g., European Union–Japan EPA, 2018; European Union–Korea FTA, 2010), the pattern is to integrate the new digital commitments into the enforceability provided by the FTA. This could be seen as the European Union ensuring that, even as WTO e-commerce talks lag and the DSU remains stalled, it is setting high-standard digital rules and strengthening them via bilateral enforcement.

In essence, the ongoing crisis of the WTO dispute settlement system has prompted a dual response in the design of dispute resolution within RTAs. On the one hand, states have shown a willingness to avoid replicating features that contributed to the paralysis of the WTO system. Most prominently, few recent RTAs establish a permanent appellate mechanism, thereby sidestepping the institutional and political controversies that surrounded the Appellate Body. Instead, RTAs generally rely on ad hoc or arbitration-style panels, which remain more closely tied to the consent of the parties and hence avoid the risk of creating a quasi-judicial body with centralised and extensive interpretative powers.

On the other hand, the crisis has reinforced a commitment to building RTA dispute settlement into a reliable forum in its own right. To this end, many agreements incorporate provisions aimed at strengthening their effectiveness, such as an emphasis on alternative dispute settlement, clearer procedural rules, greater automaticity in panel formation and mechanisms ensuring timely dispute resolution. Some RTAs also provide for jurisdiction over a broader set of covered obligations, such as on environmental, labour and digital trade-related issues, reflecting an intention to ensure that regional dispute settlement can offer comprehensive adjudication when multilateral avenues are unavailable. Taken together, these design choices suggest that states are not only reacting defensively to the WTO’s shortcomings but also proactively shaping regional dispute settlement to function as a credible and independent alternative.

Consequences for the Multilateral Trading System

The regionalisation of trade dispute settlement, while understandable as a pragmatic response to current challenges at the WTO, carries significant implications for the multilateral trading system. One immediate consequence of increasing RTA adjudication is the risk of fragmentation, coherence and legal certainty in international trade law. If multiple independent dispute settlement mechanisms are interpreting similar or overlapping provisions, there is a risk for inconsistent jurisprudence. In theory, all are applying broadly WTO-similar norms, but without a single appellate review, interpretations could diverge. Over time, this could create parallel bodies of precedent. While international law does not strictly adhere to the doctrine of stare decisis, the WTO Appellate Body has established a sort of coherent case law that members have come to rely on (Zang, 2019). Countries are aware of this risk, and the fact that RTAs instruct panels to be guided by the WTO law is likely an attempt to preserve some sense of coherence.

The WTO DSU’s exclusivity under Article 23 could collide with an RTA’s exclusivity clause. Especially as RTAs innovate beyond WTO rules, their disputes will inevitably generate new jurisprudence. A primary issue is a conflict-of-laws scenario, mainly when a dispute can be characterised under two separate agreements. Jurisdictional conflicts might also arise; for example, a respondent could object that a panel lacks jurisdiction due to a forum clause, or two countries might bring parallel cases in different fora. The proliferation of dispute venues complicates the coherence of international trade law and might trump the primacy of the multilateral regime.

More fundamentally, the turn to RTAs reflects a partial departure from one of international economic law’s most foundational norms: non-discrimination—in its MFN variant. RTAs, by definition, discriminate in favour of their members. When disputes are settled in an RTA context, any remedy is localised as it benefits or penalises only the parties, not all WTO members. In the WTO system, one systemic advantage is that a ruling clarifying a right applies to all members; through the MFN principle, any concession has to be extended to all. Over time, if enforcement increasingly shifts to the regional level, non-parties may become excluded or face trade diversion. The spaghetti bowl effect is not just about trade flows (Bhagwati, 1995) but also about enforcement; preferential enforcement means only some countries get issues fixed (Panezi, 2016).

The most important concern relates to the position of lower-middle income and small countries. For many of these states, mega-RTAs and other RTAs are not a viable alternative, as they risk further fragmenting the rules governing global value chains in which such countries often play a critical role. By contrast, participation in the multilateral trading system may offer a comparatively safer avenue. For lower-middle income countries—typically in economically, financially and politically weaker negotiating positions—the WTO provides not only access to a rules-based system that constrains power asymmetries but also a forum through which their integration into the global economy can be safeguarded (Hoekman, 2018). Many nations lack the capacity or market-size attractiveness to negotiate advanced RTAs, and they rely on the multilateral system to have a voice and enforce their rights against larger players. If trade action fully shifts to RTAs, these countries may be left unable to benefit from new rules or effectively challenge unjust trade barriers. As RTAs often exclude the more vulnerable economies, the result may be a two-tiered trading system (Azevêdo, 2014): one in which major and some emerging and medium-sized economies operate under newly crafted rules with robust regional enforcement and another in which lower-middle income or non-aligned countries contend with inefficiencies in the WTO system without access to alternative fora. Their disputes may go unresolved, injustices may be upheld and new divides may be created.

Some emerging economies are trying to follow the trend by building their own regional dispute settlement systems. For example, the African Continental Free Trade Area (AfCFTA, 2021)—bringing together the 55 countries of the African Union and 8 Regional Economic Communities (RECs)—has a dispute settlement protocol which is inspired by the WTO model, including an Appellate Body (African Union, n.d.). If effectively implemented, members could have a regional forum covering the continent. This could empower them to resolve intra-African disputes and eventually present a united front in global trade issues. However, AfCFTA’s system is nascent and untested, and does not solve problems with external partners.

Overall, a possible long-term scenario is that the WTO becomes less central to dispute settlement, with its role shifting more towards administrative functions and minor negotiations (Linscott, 2022). If major disputes are increasingly handled outside the WTO, the organisation’s centrality would be reduced, potentially leaving rule-making and adjudication to regional processes.

However, the consequences of the move to RTAs may, in fact, create opportunities for strengthening the WTO in the future (Hughes, 2023; Suárez, 2024). First, the success of RTAs in addressing new issues and resolving disputes demonstrates that effective adjudication does not depend on a permanent appellate tier. Indeed, one lesson from the RTA experience may be that appellate review is not indispensable; also, prior to the establishment of the WTO, the GATT system operated without an appellate instance, yet it still played a central role in stabilising the trading system. Moreover, this suggests that members could explore alternatives to a standing appellate body, such as voluntary appeal arbitration mechanisms—currently exemplified by the Multi-party Interim Appeal Arbitration Arrangement (MPIA) (Pauwelyn, 2023), or more flexible review structures, including alternative dispute settlement inspired by the RTA practice. Rather than viewing the absence of appellate review as a weakness, it may be considered a feature that could allow the WTO dispute settlement system to regain functionality while preserving member control.

A further lesson from regional practices lies in the integration of non-trade concerns into trade agreements. RTAs have increasingly incorporated environmental, labour and digital trade chapters and provisions, demonstrating that the inclusion of such standards can be made compatible with market-opening disciplines and does not necessarily trigger protectionist abuse (Vidigal, 2022). This experience could help dispel long-standing anxieties within the WTO about the ‘linkage’ between trade and non-trade issues (see, generally, Alvarez, 2002). If regional models show that enforceable environmental, labour and digital economy commitments are feasible, they may encourage WTO members to revisit these questions in a multilateral setting, potentially laying the groundwork for a more up-to-date and socially responsive trading system.

Overall, the coexistence of numerous RTAs may generate pressures to reconcile their overlapping commitments, creating incentives to return to the multilateral table and dispute settlement forum in order to consolidate rules—a ‘domino effect’ (Baldwin & Gylfason, 1995) in the realm of dispute settlement. While scholars have long debated whether regionalism undermines or reinforces multilateralism, the proliferation of RTAs with innovative dispute settlement designs suggests that fragmentation itself can become a driver of renewed multilateral engagement and institutional improvement. In this sense, the regional turn does not necessarily mark a permanent retreat from the WTO and its dispute settlement system but may instead lay the groundwork for a stronger, more inclusive, just and updated multilateral framework. It might, in fact, eventually allow members to return to the ‘mother forum’.

In the meantime, the WTO still plays a valuable role in accommodating the regionalisation process. Its transparency mechanism for RTAs ensures that all RTAs are discussed and notified, allowing the WTO to serve as a repository of information and a venue for raising concerns about potential inconsistencies. However, because the mechanism lacks enforcement powers, it can do little if the outcome of an RTA violates the WTO rights of a third party. There is currently a debate over whether members should intensify the scrutiny of RTAs on procedural grounds (Linscott, 2022). For instance, new-type ‘early harvest’ agreements that take the form of plurilateral frameworks (Dimitropoulos et al., 2025)—such as the Indo-Pacific Economic Framework for Prosperity—arguably raise questions about compliance with the WTO requirement under GATT Article XXIV:8(b) that free trade agreements must cover ‘substantially all trade’, a rule intended to prevent the abuse of the RTA exception (Linscott, 2022). If the WTO cannot effectively enforce these procedural rules, there is a risk of further erosion of multilateral disciplines governing RTAs themselves.

Conclusion

The decline of the WTO dispute settlement system has created both risks and opportunities for international trade governance. On the one hand, reliance on RTAs entrenches fragmentation, might exclude weaker economies and undermines the universality of multilateral norms. On the other hand, the growing role of regional dispute settlement mechanisms demonstrates that states remain committed to rules-based enforcement, albeit outside Geneva. This turn to RTAs should not be read solely as a retreat from multilateralism. Rather, it highlights a dynamic process in which RTAs experiment with new institutional designs and broaden the substantive reach of trade adjudication. These developments may ultimately offer lessons for reform and renewed legitimacy in international trade governance, feeding back into the multilateral system. Lessons from contemporary RTAs could inspire pathways for the WTO to update its rules to address emerging regulatory challenges posed by digital trade and climate change mitigation. Moreover, the experience from contemporary RTAs shows that more flexible dispute settlement models can function even without an Appellate Body; such models could restore WTO’s functionality while addressing members’ concerns regarding judicial overreach and institutional rigidity. For the WTO to reclaim its central role, members must recognise the value of these regional innovations and translate them into a revitalised multilateral dispute settlement framework. The ‘domino effect’ potentially generated by the proliferation of RTAs could build pressure and momentum for meaningful multilateral reform, three decades after the organisation’s establishment.