The World Trade Organization on Tuesday called on its members to revise global trade rules, warning that the world’s fragmentation into rival geopolitical blocs could leave global GDP 5.1% lower and exports 18.6% lower by 2050 than projected.
In its annual report, the organization said current rules had failed to keep pace with shifts in the balance of economic power, the rise of digital trade and mounting political tensions among major countries, increasing the risk of fragmentation and causing greater harm to poorer nations.
Fragmentation and cooperation scenarios
In a more damaging scenario, the report forecast that the collapse of multilateral cooperation and its replacement by various groups of free-trade agreements would reduce global GDP by 6.9% and exports by about 27%.
By contrast, the report said stronger multilateral cooperation could increase global GDP by 2.9% and exports by about 18%. It said least-developed countries would likely benefit more from such cooperation, while also facing substantial losses in the event of fragmentation.
Stalled reforms and four challenges
The warning came after the WTO’s 166 members failed to agree on a package of reforms at a ministerial meeting held in Yaoundé, Cameroon, last March, and ahead of the resumption of talks in Geneva on decision-making, dispute settlement, and challenges arising from subsidies and government intervention.
The organization is seeking consensus among all members on the reforms, given its reliance on consensus-based decision-making, the differing levels of economic development among member states and their conflicting interests. WTO Director-General Ngozi Okonjo-Iweala warned that global trade is facing its most severe period of turbulence in 80 years.
The report’s main challenges
A broader distribution of economic power.
Growing government intervention in economies.
Changes in the nature of trade driven by digital transformation.
Rising political tensions.
“If the multilateral global system collapses, our scenarios indicate that the costs would be extremely high”
Trade and artificial intelligence
Steiger said the trading system was at a “critical juncture” and that the rules were under pressure with tangible effects. The report said integration into the multilateral trading system had helped expand trade among members by 140% since 1995 and accelerated economic growth in low- and middle-income economies.
The report forecast that artificial intelligence would increase global trade by 40% by 2040 and add more than 13% to global GDP over the next 15 years.
