The European Union, the WTO, and the “Rhetoric of Reaction”

Abstract

This article examines the European Union’s response to the United States’ challenge to two pillars of the multilateral trading system: the Most Favoured Nation principle and compulsory third-party adjudication. Drawing on Hirschman’s analysis of the “Rhetoric of Reaction”, it argues that the United States has framed its attack to the WTO disciplines through claims of perversity, futility, and jeopardy. Rather than resisting this rhetoric, the European Union has increasingly echoed that discourse. Using the “Liberation Day” tariffs and the ensuing Turnberry “deal” as a test case, the article shows how the European Union moved from its firmer reaction to the 2018 Section 232 measures to a more deferential posture in 2025, including the acceptance of discriminatory tariffs and the decision not to initiate WTO litigation. The article contends that this shift weakens the European Union’s traditional role as a defender of multilateralism, normalizes departures from non-discrimination and dispute settlement, and risks accelerating the erosion of key principles of the WTO legal order.

1. Introduction

In his seminal 1991 book titled “The Rhetoric of Reaction”, Albert Hirschman analyzed and debunked the reactionary discourse used by conservatives over the course of three centuries to oppose major achievements in western democratic societies. Building on Marshall (1965), Hirschman (1991) focused on three main steps in the “development of citizenship” in the West: (i) the assertion of equality before the law; (ii) universal suffrage; and (iii) welfare state. Hirschman (1991) then noted that each of these passages has been opposed by three corresponding waves of reactionary rhetoric. First, conservatives have relied on the “perversity” argument to claim that any reform would produce outcomes opposite to its original intent. Second, they have used the “futility” argument to maintain that reforms would not produce tangible, meaningful results. Finally, they have resorted to the “jeopardy” argument to show that the cost of reforms would outweigh previous accomplishments.

In recent years, the United States has launched an unprecedented attack to the two main achievements of the multilateral trade regime established pursuant to the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO): (i) the principle of non-discrimination encapsulated in the Most Favoured Nation (MFN) treatment; and (ii) compulsory third-party adjudication.

In doing so, the United States seems to have drawn on the rhetoric of reaction. Take its critique to the MFN principle. The United States has made the following statement in a communication to all WTO Members: “The MFN principle is not just unsuitable for this era; it prevents countries from optimizing their trade relationships in ways that would benefit each party in that relationship”.1 The United States has reinforced this point in a subsequent communication (“[A] maximalist MFN practice in the current global economic circumstances does not advance, and in fact hinders, national interests”).2 It is hard not to see parallels with the “perversity” thesis summarized above.

Turning to dispute settlement, the following statement is illustrative of the United States’ attitude:

The WTO dispute settlement system … provided no help. Disputes took years to wind through the system, and even when a specific measure was found to be non-compliant, severe and irreversible harm to jobs, factories, and communities was suffered long before the dispute was resolved, if it was resolved at all. Further, the Appellate Body inappropriately restricted Members’ ability to counter non-market economic distortions and to provide relief from unfairly traded imports.3

This last passage is a clear example of the use of both the “futility” and the “jeopardy” arguments.

As is well known, the United States did not just stop at expressing its views in communications to other WTO Members. Over the last few years, the United States has deployed actions that mark a radical departure from the principles of non-discrimination and compulsory third-party adjudication. As regards the former, the United States has increasingly relied on discriminatory tariffs and other trade restrictive policy instruments. Concerning the latter, since September 2017 the United States has systematically opposed proposals in the Dispute Settlement Body to launch the appointment process of new Appellate Body Members.4 The United States has kept this posture throughout the Biden presidency and, unsurprisingly, during President Trump’s second term, sending the world a message that certain views are widely shared in Washington DC, irrespective of the political affiliation of the White House tenant.5

Rather than resisting the reactionary rhetoric employed by the Trump administration, the European Union has increasingly echoed that discourse, either explicitly or implicitly. This short contribution addresses the European Union’s attitude vis-à-vis the United States-led shake-up of the WTO’s foundations, using the so-called “Liberation Day” tariffs as a test case. Section 2 provides a brief account of the European Union’s response to the “Liberation Day” tariffs. Section 3 critically examines the European Union’s response. Finally, Section 4 offers concluding remarks on the implications of this response for the WTO.

2. The European Union’s Response to the “Liberation Day” Tariffs

2.1. The Precedent: The European Union’s Response to the Section 232 Measures on Steel and Aluminium

In 2018, during President Trump’s first term, the United States increased tariffs on imports of steel and aluminium from third countries under Section 232 of the Trade Expansion Act of 1962.

At that time, the European Union’s response was strong and manifold. First, the European Union joined forces with other WTO Members, raising the matter in WTO bodies and committees. As seven other WTO Members, the European Union lodged a WTO complaint against the United States.6 Second, the European Union coordinated with other WTO Members also as regards the retaliatory response to the Section 232 tariffs, in the form of additional duties on imports of certain products from the United States.7 Adopting an expansive interpretation of the WTO disciplines on safeguards, the European Union designed its measures as “rebalancing measures” within the meaning of Article XIX:3(a) of the GATT and Article 8.2 of the Agreement on Safeguards, and so did other WTO Members. Although WTO panels found that expansive interpretation to be untenable8, it is nevertheless noteworthy that the European Union and other Members tried to coordinate their response and to keep the conversation within the four corners of the WTO. Third, even as the European Union and the United States tried to negotiate a long-term solution to steel overcapacity, the European Union agreed to a path whereby panel proceedings were replaced by arbitration pursuant to Article 25 of the DSU to keep its dispute with the United States indefinitely suspended (but ultimately alive), with the possibility of reactivation.9

2.2. The Turnberry Surrender

Fast forward to April 2025, one of the first actions by President Trump in his second term in office was the imposition of “reciprocal” tariffs on imports from the rest of the world under the International Emergency Economic Powers Act (IEEPA). Pursuant to the first announcement, EU goods shipped to the United States were supposed be subject to an additional import duty of 20% ad valorem.

Contrary to 2018, this time the European Union capitulated without arguing. Weeks after the announcement of the “Liberation Day” tariffs, the European Commission’s leadership rushed to a golf club in Turnberry, Scotland to meet with President Trump and its team and offer its surrender to virtually all requests by the United States. The main terms of the European Union—United States “Agreement on Reciprocal, Fair, and Balanced Trade” are as follows: (i) EU exports to the United States already subject to MFN applied rates of 15% and above are not subject to additional duties, in principle; (ii) tariffs on EU exports to the United States subject to lower duties are increased to 15%; (iii) tariffs on US industrial products exported to the European Union are eliminated; and (iv) the European Union commits to purchase more US liquified natural gas and US artificial intelligence chips, and incurs a number of additional, one-sided obligations.10 Soon thereafter, the European Union began the process of transposing the Turnberry surrender into binding, legislative acts of EU law.11

Like other WTO Members, notwithstanding the manifest WTO-inconsistent nature of the IEEPA tariffs, the European Union did not take the United States before a WTO panel.12 What governments around the world did not do, small companies in the United States did, challenging the illegality of the IEEPA tariffs under US law before US courts. Eventually, the matter was referred to the US Supreme Court, which outlawed the IEEPA tariffs clarifying that the US Constitution gives Congress, not the President, the power to impose import tariffs.13 In essence, the European Union will implement a deal—the adoption of the IEEPA tariffs—the premise of which (the “Liberation Day tariffs”) is no longer in place due to a decision by the US Supreme Court.

After the Supreme Court decision, the European Parliament did have a moment of pride and called upon the European Commission to review the terms of the Turnberry surrender. Faced with the uncertainty of the announcement by the US President of new import tariffs under different legal bases (Section 122, Section 301), the European Parliament posed a number of conditions to give its green light to the transposition into binding instruments of EU law of the agreement with the United States. Specifically, the European Parliament made the following demands: (i) the elimination of tariffs by the European Union on US imports would be suspended in the event that the Unites States were to impose duties in excess of 15% on EU imports (suspension clause); (ii) the reduction in tariffs would only enter into force if and when the United States were to effectively lower tariffs on certain products (sunrise clause); (iii) the removal of tariffs on US industrial products would expire on 31 March 2028 with a possibility of extension after an impact assessment of its effects (sunset clause); (iv) a safeguard mechanism would kick in if increases in imports from the United States were to cause injury to European producers.14

On 20 May 2026, the Council and the Parliament announced a compromise. The new formulation of the regulation includes a suspension mechanism, a suspension clause, and a sunset clause pursuant to which the regulation will be in force until 2029, unless further extended.15 The legislative process was completed with the publication of Regulation (EU) 2026/1455 at the end of June 2026.16

3. Evaluating the European Union’s Response

The European Union has chosen the path of least resistance to respond to the actions of the United States. On the one hand, the European Union is responding to the discriminatory tariffs of the United States with its own discriminatory measures, granting advantages to US imports and not extending them to like products imported from other countries. Moreover, as it will be shown in Section 3.1 infra, the European Union has expressed support for the critique raised by the United States against the MFN principle. On the other hand, the European Union has refrained from challenging the manifestly WTO-inconsistent tariffs imposed by the Trump administration before a WTO panel. With its actions, the European Union appears to be buying into the Trump administration’s reactionary rhetoric, with non-negligible consequences for the WTO.

3.1. There Is a New Reciprocitarian in Town

In the build-up to the Yaoundé Ministerial Conference of March 2026, various Members have exchanged communications laying out their views on how to “reform” the WTO system. As anticipated in Section 1 above, the United States maintained in its communications that the MFN principle is not passing the test of time, as it was designed for an era where convergence among different economic systems towards a liberal understanding appeared inevitable. As things went differently, and considering the fact that other Members did not reduce their tariffs to the level initially hoped for in Washington DC, the United States is now calling for a rethinking of the “unconditional” nature of MFN.17

In a surprising move, the European Union echoed the United States’ sentiment in its communication on WTO reform. According to the European Union, the discussion on WTO reform “should include reflections on the role of the MFN principle in today’s context, its link to reciprocity and to Members’ respective levels of openness”.18 The European Union is thus giving up its role as a staunch defender of the rules of multilateralism, embracing the US administration’s reactionary rhetoric.

This is not the first time in history that the international trade community hears calls for greater “fairness” and “reciprocity”. As Bhagwati and Irwin (1987) noted, however, the “reciprocitarian” discourse in trade policy became historically popular in trading nations when they saw their hegemony fade. In their article, Bhagwati and Irwin drew analogies between Britain at the end of the 20th century and the United States in the 1980s, which both saw demands for “fair trade” and “reciprocity” surface as they were losing their trade hegemony to foreign contenders.

The European Union is now joining the “reciprocitarian” camp even though it was never a hegemon in the field of international trade, by any measurable standard.19 This is an interesting development, for at least two reasons. First, many export driven industries in the European Union may see their overall position deteriorate if other WTO Members were to adopt a reciprocitarian agenda. For example, companies in the agricultural sector that benefit from generous support schemes within the European Union may face higher barriers in foreign markets, on grounds of reciprocity. Second, the European Union’s position is all the more interesting when confronted with the attitude of other players. For instance, in its communication on WTO reform, China reiterated its unabated support for the MFN principle, described as the “bedrock of the WTO”.20

3.2. “Turning the Other Cheek”: The European Union Did Not Take the United States to a WTO Panel

Compulsory third-party adjudication is the other main foundation of the WTO legal architecture. As the Appellate Body became inoperative due to the actions of the United States, the European Union put itself at the forefront of an initiative taken by a subgroup of WTO Members, establishing an interim appeal arbitration solution: the Multi-Party Interim Arbitration Arrangement (MPIA).

The European Union hails the MPIA as a key tool to ensure the finality of disputes, and continues to court other WTO Members to join.21 In a dispute with Türkiye—that is, a non-MPIA Member—the EU even agreed to have the appeal referred to ad hoc arbitration, borrowing from the rules of procedures established under the MPIA.22 Most recently, in the context of a dispute with Indonesia (a non-MPIA Member), the European Union did not hesitate to appeal an unfavourable panel report into the void, while offering its counterparty to resolve the matter through appeal arbitration.23 As regards the continued, manifest violations of WTO law by the United States, however, the European Union has not even considered initiating a WTO dispute. This is a warning sign for the WTO system as a whole.

It is true that the United States has appealed most unfavourable panel reports into the void since 2019 and has taken a strong stance against the review by panels of invocations of the national security exception, that is, the likely defence the United States would have raised against the challenges to the “Liberation Day” tariffs. At the same time, the United States itself had suggested to other Members the possibility to resort to non-violation complaints to challenge measures that it considers to be based on “national security”.24 In a nutshell, a non-violation complaint is a challenge directed to a Member’s measure on the grounds that it nullifies or impairs another Member’s rights under the WTO Agreements, irrespective of whether the contested measure is WTO-inconsistent (Durling and Lester 1999). A finding of non-violation nullification or impairment of benefits would serve as the basis for affected Members to suspend equivalent concessions or other obligations. Given the broad reach of the United States’ tariffs, their lingering effects, and the sheer magnitude of US-EU trade, a non-violation complaint could perform a deterring function, at least in theory. While it is true that case law has developed a very demanding test for the success of non-violation complaints (Mavroidis 2025), the European Union and other Members decided that it was not even worth trying. In addition, Article XXIII of the GATT and Article 26.2 of DSU further offer WTO Members the possibility to claim that the existence of a “situation” is causing adverse effects, again without discussing the WTO-compatibility of another Member’s measures. “Situation complaints”, unexplored in WTO case law, have been proposed as a possible response to the United States’ assertive trade policy by other WTO Members, collectively (Paulsen and Ciuriak 2026).

Despite the various options on the table, the European Union decided to not use all available tools under WTO law, and instead sought a truce outside of the WTO legal framework, in a manner that is inconsistent with its basic obligations under the GATT.25 In so doing, the European Union is embracing the “futility” argument as regards WTO dispute settlement, thereby validating the United States’ reactionary discourse.

4. Conclusions: What Does the European Union’s Response Mean for the WTO?

Support for non-discrimination and compulsory third-party adjudication at the WTO is eroding, particularly as the original architect of the multilateral trade regime—the United States—calls for a major overhaul of the rules in order to give Members more control. The European Union, long a champion of multilateralism, seems now willing to reconsider its position. Faced with the Trump Administration’s reactionary rhetoric and weaponization of trade restrictions, the European Union has preferred to echo the United States’ dissatisfaction on the functioning of MFN and to refrain from challenging the Liberation Day tariffs and subsequent trade restrictions before WTO panels. The actions (or inactions) of the European Commission’s leadership signal a de facto endorsement of the reactionary attacks to the multilateral trading system deployed by the Trump administration. “Futility”, “perversity”, and “jeopardy” arguments concerning the present and future of the WTO are dominating the current debate without credible opposition, putting into questions some of the major advancements of the post-WWII international legal order.

It is hard to see how the WTO can do business as usual. The discussion on WTO reform is effectively held hostage by calls to turn back the hands of the clock to a pre-GATT/WTO regime, with Members being free to treat imports differently based on the origin of the products and with an evanescent or—at best—optional enforcement mechanism.

In this context, the European Union’s attitude is a warning sign for the entire multilateral trading system. The European Union has the liberalization of trade in its DNA. Beyond the existence of a single market as regards internal trade, this also applies to its trade relations with third countries. Article 21.2(e) of the Treaty on the European Union (TEU), for instance, requires the European Union to “pursue common policies and actions, and … [to] work for a high degree of cooperation in all fields of international relations, in order to: … encourage the integration of all countries into the world economy, including through the progressive abolition of restrictions on international trade”. The European Union’s court system in Luxembourg is the most advanced supranational mechanism for the resolution of disputes and protection of the rule of law (Stein 1981). Recent shifts in its attitude towards non-discrimination and dispute settlement at the WTO seem to be in direct contradiction of the European Union’s history, values, and core interests.

The European Union is not in an easy position, as the United States’ tariffs have the double effect of restricting access of EU goods to the United States’ market and diverting trade in certain goods from third countries to the European Union. The European Union’s political leadership is under heavy pressure from domestic constituencies to avoid antagonizing the United States’ administration and to raise barriers against imports from third countries. Against this background, the European Union has chosen realpolitik over principles. However, it is at least doubtful that this strategy will pay off, for at least two reasons. First, as it happens with “appeasement” strategies, the Turnberry surrender may not shield the European Union from future, sudden changes in priorities and needs of the United States’ administration.26 Second, the European Union may be perceived as sending a message of disengagement from the WTO to the rest of the world. If not even the European Union is there to defend and support the WTO regime, it is difficult to expect other Members to not consider alternatives based on protectionism, disregarding their WTO obligations.

This contribution is intended as an alarm bell. We share the view (and hope) advanced by Mavroidis (2025) that the European Union, with its history and network of trading partners, could emerge as a credible leader charting a new path for the WTO. As the historical “leader”—the United States—no longer considers the WTO as a priority and other Members lack the necessary “soft power” to credibly emerge as new leaders, the current situation could represent an opportunity for the European Union to assert its leadership, defend the cornerstones of the WTO edifice (non-discrimination and compulsory third-party adjudication), and put forward an ambitious agenda for the future of the institution. By espousing the reactionary rhetoric of the United States and actually deploying an increasing number of unilateral, WTO-inconsistent trade restrictive measures, the European Union might instead contribute to the rapid unraveling of the multilateral trading system. Should that happen, the price for the European Union in the medium to long term risks being a lot higher than any short-term relief provided to industrial sectors in distress by disowning the foundational principles of the WTO, which also happen to be part of the European Union’s core values.