By Anniek Barnhoorn
Everyday life revolves around change, whether environmental, social, economical or political. Within each of these categories, institutions play a crucial role. Whilst each is intrinsically different, institutions change throughout temporal dimensions. One of the challenges associated with institutional change is path dependency, a phenomenon that enforces the direction of a certain path, thereby often making institutions difficult to change.
This phenomenon can be seen in the World Trade Organization (WTO). Set up in 1995 the WTO is the only global international organization dealing with the rules of trade between nations. The WTO is suffering from a steady erosion of its centricity, which will sooner or later bring the world to a tipping point. This controversy is in a large part the result of the 2001 Doha trade negotiations that were never completed. This had a negative path dependent effect from which the WTO was never able to fully recover. In addition, global politics and trade governance changed as international commerce started following supply-chain trade. Thereby making traditional trade no longer applicable to the WTO’s current framework.
Thus, since the WTO cannot recover from its flaws, nor keep up with the need for new rules governing the intertwining of trade, investment, intellectual property, and service, scholars are suggesting a WTO 2.0, a new WTO adapted towards supply-chain trade. Despite having numerous advantages, this solution also has many disadvantages, for example defeating the WTO’s biggest success, the dispute settlement mechanism. Therefore, this case study exemplifies that path dependency is difficult to reverse and that history is of great importance. Finally, despite being tied to path dependency, the world’s most important trading partners should address and adapt the WTO’s norms, thereby making way for the continuously developing new global trade regime.