The World Trade Organization (WTO) warned on Tuesday that the failure to update the global trading system could lead to a reduction in global GDP of up to 10 percent. This warning is presented in the organization's annual report, titled "World Trade Report 2026: A Critical Juncture for the Global Trading System," which examines the achievements of the multilateral trading system over the past 80 years and its current challenges.
Achievements and Challenges of the Multilateral System
Ngozi Okonjo-Iweala, the Director-General of the WTO, stated that the multilateral trading system has brought significant benefits to the global economy over the past 80 years and has helped create a unified and resilient global economy. She also noted that approximately 72 percent of global goods trade continues to be conducted under the "most-favored-nation" terms of the organization.
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Okonjo-Iweala emphasized that "the face of global trade has changed significantly, but the fundamental logic of this system, which is that all economies are better off cooperating than acting unilaterally, remains just as relevant." She also pointed out that WTO members are actively discussing reforms and acknowledge that "the status quo is not an option."
Future Scenarios for Global Trade
The report models three possible scenarios for the future of the global trading system. If the multilateral framework is strengthened, global GDP could increase by 2.9 percent and exports by 17.9 percent by 2050. In contrast, two other scenarios predict a weakening of multilateral trade rules. In a "geographically fragmented world," where trade cooperation is organized around geopolitical blocks, global GDP could decline by 5.1 percent.
According to Robert Staiger, Chief Economist at the WTO, the difference between strengthening multilateral cooperation and weakening the system could be as much as 10 percent of actual global GDP. He stated, "If the status quo is not sustainable, as many members believe, this highlights the potential costs of inaction on reforms."
The report also noted that over eight decades, this system has managed to reduce trade barriers, expand global trade nearly 50-fold, and create a rules-based integrated global economy.
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