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WTO: Trade Fragmentation Could Slash Global GDP by Up to 6.9 Percent
(MENAFN) The World Trade Organization sounded the alarm Tuesday, warning that a fracturing of the global trading system into competing geopolitical blocs could drag global GDP down by 5.1% and slash global exports by 18.6%.
The outlook darkens further under a worst-case scenario: a full collapse of multilateral cooperation, in which the WTO framework gives way to a fragmented patchwork of bilateral free trade deals, would cut global GDP by 6.9% and shrink exports by 26.9%, the organization found.
The reverse is also true, according to the report — strengthening multilateral trade cooperation instead could lift global output by 2.9% and drive a 17.9% expansion in global exports.
WTO Director-General Ngozi Okonjo-Iweala warned that the global trading system is now navigating its most turbulent stretch in eight decades, as the non-discriminatory rules underpinning it come under mounting strain.
She pointed to a telling shift in the data: roughly 72% of global merchandise trade currently moves under most-favored-nation tariff terms, down from close to 80% in 2022.
The report credited integration into the multilateral trading system with fueling a 140% surge in trade between member nations since 1995, while accelerating economic growth across low- and middle-income economies. Yet those gains haven't landed evenly — least-developed countries still capture less than 1% of world trade, and face manufacturing and services trade costs running 50% higher than those in high-income economies.
Looking further out, the report struck a more optimistic note on technology's role: artificial intelligence could expand global trade by 40% by 2040 and tack on more than 13% to world GDP over the next 15 years, with digitally deliverable services expected to lead the charge.
The outlook darkens further under a worst-case scenario: a full collapse of multilateral cooperation, in which the WTO framework gives way to a fragmented patchwork of bilateral free trade deals, would cut global GDP by 6.9% and shrink exports by 26.9%, the organization found.
The reverse is also true, according to the report — strengthening multilateral trade cooperation instead could lift global output by 2.9% and drive a 17.9% expansion in global exports.
WTO Director-General Ngozi Okonjo-Iweala warned that the global trading system is now navigating its most turbulent stretch in eight decades, as the non-discriminatory rules underpinning it come under mounting strain.
She pointed to a telling shift in the data: roughly 72% of global merchandise trade currently moves under most-favored-nation tariff terms, down from close to 80% in 2022.
The report credited integration into the multilateral trading system with fueling a 140% surge in trade between member nations since 1995, while accelerating economic growth across low- and middle-income economies. Yet those gains haven't landed evenly — least-developed countries still capture less than 1% of world trade, and face manufacturing and services trade costs running 50% higher than those in high-income economies.
Looking further out, the report struck a more optimistic note on technology's role: artificial intelligence could expand global trade by 40% by 2040 and tack on more than 13% to world GDP over the next 15 years, with digitally deliverable services expected to lead the charge.
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