WTO warns of ‘most serious, sustained’ trade disruptions

The World Trade Organization (WTO) has issued a stark warning about the most serious and sustained trade disruptions the global trading system has experienced in living memory. In its annual report, the WTO projects that a reversion to unilateral trade policies could slash global GDP by approximately five percent and reduce exports by 18.6 percent by 2050.

This warning echoes the concerns raised by the organization's director general, Ngozi Okonjo-Iweala, who highlighted that trade cooperation has helped narrow income gaps between developing and advanced economies and contributed to peace among members. However, the outlook has darkened following the introduction of tariff policies by the United States and escalating geopolitical tensions, particularly in the Middle East.

The WTO identified several factors contributing to the erosion of cooperation, such as shifts in economic power and an increasing role of government intervention in markets. If fragmentation along geopolitical lines continues, global GDP could be reduced by around five percent, while the complete disappearance of the WTO and its replacement by a network of free trade agreements (FTAs) could lead to a loss of seven percent of global GDP.

The smallest and poorest economies would be particularly vulnerable to these disruptions, with a potential reduction in GDP of roughly three percent if members act to reinforce multilateral trade cooperation. Currently, the WTO remains the backbone of the rules-based global trading system, with 72 percent of global trade still operating under its rules.

However, the agency's chief economist, Robert Staiger, acknowledged that this share has decreased from 80 percent two years ago, signaling a troubling trend.