WTO Demands Trade Rule Overhaul as GDP Risk Looms

The World Trade Organization has warned that the global economy could face significant losses if countries fail to reform international trade rules and the world economy becomes divided into competing geopolitical blocs. According to the WTO’s annual report, global gross domestic product could be 5.1% lower and exports could decline by 18.6% by 2050 under a scenario of deep economic fragmentation. The findings highlight the long-term risks posed by rising protectionism, geopolitical tensions and weakening international economic cooperation.

The WTO said existing trade rules have not kept pace with major changes in the global economy. Economic power has shifted considerably, digital technologies have expanded, supply chains have become more complex and governments are playing a larger role in directing industrial activity. These developments, according to the organisation, have created new challenges that the current multilateral trading system is not fully equipped to address.

The report comes amid growing concerns over the increasing use of tariffs, trade restrictions and industrial policies by major economies. Governments are seeking to strengthen domestic production and reduce dependence on foreign suppliers, particularly in strategically important sectors. While such measures may be intended to improve economic resilience, the WTO cautioned that excessive fragmentation could raise costs, disrupt supply chains and reduce the benefits of international trade.

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The organisation’s economic modelling illustrates the potential consequences of a world divided into rival economic groupings. A sustained split into competing geopolitical blocs could weaken investment, limit market access and reduce opportunities for businesses operating across borders. The projected 5.1% reduction in global GDP and 18.6% fall in exports by 2050 underline the scale of the economic damage that could result from a breakdown in open and predictable trade relations.

The WTO also pointed to a decline in the share of global merchandise trade conducted under its most-favoured-nation tariff terms. Around 72% of global merchandise trade currently takes place under these terms, compared with approximately 80% in 2022. The organisation described the decline as a worrying trend, suggesting that more trade is increasingly being conducted through preferential arrangements or other mechanisms outside the traditional multilateral framework.

The report called for a renewed effort to update global trade rules and ensure that the WTO remains relevant to the changing international economy. Reforming the system could help address emerging issues involving digital commerce, supply-chain security, industrial subsidies and state intervention while preserving the benefits of cooperation. The warning comes as policymakers weigh national economic priorities against the broader risks of a fragmented global trading system.

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