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WTO Warns Trade Fragmentation Could Deepen Global Economic Losses
(MENAFN) The World Trade Organization warned Tuesday that further fragmentation of the global trading system into competing geopolitical blocs could significantly weaken the world economy, potentially reducing global gross domestic product by 5.1% and cutting international exports by 18.6%.
The WTO said the economic damage could become even greater if multilateral trade cooperation were to collapse entirely and the current system were replaced by a loose network of bilateral free trade agreements. Under that scenario, global GDP could decline by 6.9%, while worldwide exports could fall by 26.9%.
By contrast, strengthening international trade cooperation could generate substantial economic benefits. According to the report, reinforcing the multilateral trading system could increase global economic output by 2.9% and lift global exports by 17.9%.
WTO Director-General Ngozi Okonjo-Iweala said international commerce is going through its most serious period of disruption in eight decades, with the principles underpinning non-discriminatory trade facing growing pressure.
Despite the challenges, most global merchandise trade continues to operate under most-favored-nation tariff arrangements. The report estimated that such trade accounts for around 72% of global merchandise commerce, although that share has declined from approximately 80% in 2022.
The WTO also highlighted the economic benefits generated by participation in the multilateral trading system over the past several decades. Trade among WTO members has expanded by 140% since 1995, while greater integration into international commerce has supported faster economic growth across low- and middle-income economies.
However, the report noted that the benefits of global trade remain uneven. Least-developed countries still represent less than 1% of worldwide trade, while their manufacturing and services sectors face trade costs that are more than 50% higher than those encountered by high-income economies.
The WTO also pointed to artificial intelligence as a potential source of significant future gains for international commerce. The report projected that AI could increase global trade by 40% by 2040 and contribute more than 13% to global GDP over the next 15 years.
The technology is expected to have its strongest impact on digitally deliverable services, potentially creating new opportunities for cross-border commerce while helping reshape the structure of global trade in the years ahead.
The WTO said the economic damage could become even greater if multilateral trade cooperation were to collapse entirely and the current system were replaced by a loose network of bilateral free trade agreements. Under that scenario, global GDP could decline by 6.9%, while worldwide exports could fall by 26.9%.
By contrast, strengthening international trade cooperation could generate substantial economic benefits. According to the report, reinforcing the multilateral trading system could increase global economic output by 2.9% and lift global exports by 17.9%.
WTO Director-General Ngozi Okonjo-Iweala said international commerce is going through its most serious period of disruption in eight decades, with the principles underpinning non-discriminatory trade facing growing pressure.
Despite the challenges, most global merchandise trade continues to operate under most-favored-nation tariff arrangements. The report estimated that such trade accounts for around 72% of global merchandise commerce, although that share has declined from approximately 80% in 2022.
The WTO also highlighted the economic benefits generated by participation in the multilateral trading system over the past several decades. Trade among WTO members has expanded by 140% since 1995, while greater integration into international commerce has supported faster economic growth across low- and middle-income economies.
However, the report noted that the benefits of global trade remain uneven. Least-developed countries still represent less than 1% of worldwide trade, while their manufacturing and services sectors face trade costs that are more than 50% higher than those encountered by high-income economies.
The WTO also pointed to artificial intelligence as a potential source of significant future gains for international commerce. The report projected that AI could increase global trade by 40% by 2040 and contribute more than 13% to global GDP over the next 15 years.
The technology is expected to have its strongest impact on digitally deliverable services, potentially creating new opportunities for cross-border commerce while helping reshape the structure of global trade in the years ahead.
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