Key facts
- The World Trade Organization warned that fragmented global trade rules risk reducing economic output and disproportionately affecting poorer countries.
- The WTO urged members to reform existing trade frameworks to avoid a slide into competing geopolitical blocs.
- Global GDP could be 5.1% lower by 2050 if the world fragments into competing geopolitical blocs, according to WTO scenarios.
- Fragmented regulations limit stablecoin adoption to 3% of global payments, despite their potential to reduce trade finance friction.
The World Trade Organization (WTO) has warned that a failure to reform global trade rules could lead to fragmentation, significantly reducing global economic output and disproportionately impacting developing nations. In its annual report, the WTO highlighted that existing rules have not kept pace with shifts in economic power, the rise of industrial policy, digital trade, and escalating political tensions.
WTO economists modeled scenarios showing that global GDP could be 5.1% lower and exports 18.6% lower by 2050 if the world fragments into competing geopolitical blocs. A more severe scenario, with the collapse of multilateral cooperation, could result in a 6.9% drop in global GDP and a nearly 27% decrease in exports. Conversely, enhanced multilateral cooperation could boost global GDP by 2.9% and exports by almost 18%, with least-developed countries standing to gain the most.
WTO Chief Economist Rob Staiger described the trading system as being at a "critical juncture," citing four major challenges: a broader distribution of economic power, increasing state intervention, changes driven by digitalization and global value chains, and rising political friction. He noted that trade policy uncertainty has reached unprecedented levels, with governments increasingly using tariffs, subsidies, export controls, and industrial policies. Although 72% of global merchandise trade still occurs under WTO most-favored-nation tariff terms, down from approximately 80% in 2022, this decline is seen as a "worrisome trend" that underscores the risk of a gradual erosion of the multilateral trading system.