World Trade Report: Trade reform to boost growth; inaction
can cost 10% global GDP
·
Global
trade policy and the WTO are undergoing the most serious and sustained disruptions since the multilateral
trading system was created 80 years ago.
·
Long-standing
tensions, macroeconomic policies, domestic social pressures and perceptions that
WTO rules have not kept pace with economic change are driving the disruption.
·
The WTO
is therefore at a critical
juncture and needs to adapt to a more integrated, multipolar and
diverse global economy.
·
The system
has evolved from the 1947 GATT, covering fewer than 24 economies, into the WTO with
166 members,
covering goods, services and intellectual property.
·
It has
contributed to a sustained reduction in trade barriers and an almost 50-fold expansion in global trade.
·
Around
98% of global trade
is now associated with WTO membership.
·
Around
72% of global merchandise trade
still takes place under MFN tariff terms negotiated and committed by WTO members.
·
Average
industrial tariffs have fallen from around 22% in 1947 among four major economies to low
single digits in many economies.
·
Average
tariffs of WTO-acceding members have fallen by almost 35% since 2000.
·
The Uruguay
Round increased bound non-agricultural tariff lines:
o Developed economies: 78% → 99%
o Developing economies: 21% → 73%.
·
One cited
empirical estimate finds WTO membership increased trade between members by around
140%.
·
Economies
undertaking deeper commitments and domestic reforms during accession grew on average
1.5 percentage points faster
than comparable economies without such processes.
·
Evidence
cited in the report indicates around 85%
of WTO members experienced a decline in relative consumer prices
associated with membership.
·
Trade-cost
reductions accounted for an estimated one-fifth
to one-third of income convergence between low/middle-income and
high-income economies during 1995–2023.
·
LDCs account
for less than 1% of world trade.
·
Their manufacturing
and services trade costs are more than 50%
higher than those of high-income economies.
·
Complex
preference eligibility, NTMs, certification requirements and concentrated trade
flows create additional difficulties for small exporters.
·
Within
developed economies, import competition, technology and regional disparities have
caused income losses for some workers and communities.
·
The report
stresses the importance of domestic
policies that help people and regions adjust to and benefit from trade.
·
A unilateral
tariff may benefit some domestic producers while shifting costs onto foreign exporters.
·
If trading
partners retaliate, trade contracts, uncertainty rises, exporters lose markets and
consumers face higher prices.
·
WTO negotiations
provide a mechanism for reciprocal
tariff reductions and negotiated market access, rather than unilateral
retaliation.
·
Reciprocity – encourages governments to exchange market-opening
commitments.
·
MFN/non-discrimination – extends negotiated benefits across members
and reduces bargaining complexity.
·
Binding
commitments – make
tariff and market-access concessions predictable.
·
Transparency
and dispute settlement – reduce
uncertainty and provide mechanisms for resolving disagreements.
·
As tariffs
declined, the importance of NTMs,
domestic regulations, technical standards, SPS measures, subsidies and other behind-the-border
policies increased.
·
Services
trade depends heavily on domestic regulation rather than tariffs.
·
GATS helps
create predictable conditions for services trade.
·
TRIPS establishes
minimum IP-protection standards, supporting innovation, technology licensing and
investment.
·
WTO flexibilities
include safeguards, trade remedies, waivers, renegotiation provisions, RTAs and
special and differential treatment.
·
More than
380 RTAs have
been notified to the WTO.
·
Such flexibility
can preserve cooperation but can also cause:
o Higher prices and trade diversion through trade
remedies.
o Fragmentation through targeted or preferential
agreements.
o Reduced predictability if exemptions are disconnected
from actual trade capacity or need.
·
The WTO
continues to provide a forum for:
o Negotiation and rule-making
o Policy monitoring
o Information sharing
o Crisis management
o Dispute resolution.
·
The Trade
Facilitation Agreement, Fisheries Subsidies Agreement and plurilateral initiatives
demonstrate continued rule-making despite the unfinished Doha Round.
·
Between
2015 and 2024,
only 59% of WTO members
submitted required subsidy notifications.
·
77% of
those notifications were late,
with average delays exceeding one
year.
·
The report
says subsidy transparency gaps make it harder to assess government support and its
trade effects.
·
The Appellate
Body has lacked a functioning quorum since December 2019.
·
Panel reports
can therefore be appealed “into the void”, preventing adoption and reducing certainty.
·
Nevertheless,
panel proceedings continue and many disputes are settled.
·
Since December
2019, parties have resolved about
half of disputes without such appeals.
·
The rate
of mutually agreed solutions has increased almost threefold compared with the
previous decade.
WTO simulations
present three scenarios:
|
Scenario |
Global GDP impact |
Global exports impact |
|
Geo-fragmented world |
−5.1% |
−18.6% |
|
FTA world / WTO disappears |
−6.9% |
−26.9% |
|
Enhanced cooperation |
+2.9% |
+17.9% |
·
The report
estimates that the difference between strengthened multilateral cooperation and
WTO erosion could amount to roughly 5–10%
of global real GDP, depending on the scenario.
·
Fragmentation
would not affect economies equally.
·
Smaller
and poorer economies could lose more
than three times as much as high-income economies in a world characterised
by geopolitical trade frictions.
·
Fragmentation
would also complicate cooperation on climate change, digital governance, supply-chain
resilience and macroeconomic spillovers.
The report
identifies four structural pressures:
1.
Shifting
economic power
2.
Increasing
government intervention and “interface” problems
3.
Changing
nature of trade
4.
Geopolitical
tensions.
·
Since 1995,
low- and middle-income economies' share of global merchandise trade has nearly doubled to 45%.
·
This creates
a mismatch between current economic realities and tariff commitments established
during the Uruguay Round.
·
The report
sees potential for new reciprocal bargaining, but differences in existing tariff
bindings and policy space can complicate negotiations.
·
Governments
increasingly use subsidies,
state trading and other interventions.
·
The WTO
does not require identical economic models, but needs rules allowing different systems
to coexist without undermining market-access commitments.
·
The share
of anti-dumping measures using an “interface
methodology” rose from about one-quarter in 2015 to more than one-third a
decade later.
·
Subsidy-notification
gaps remain a major concern.
·
Global
value chains mean tariffs and export restrictions can affect production networks
far beyond the immediate trading partners.
·
WTO simulations
estimate that AI could increase
global trade by 40% by 2040.
·
AI could
add more than 13% to global
GDP over the next 15 years, according to the report's simulations.
·
Digitally
delivered services grew by 10%
in 2025.
·
Commercial
services represented an estimated 27.6%
of global trade in 2025.
·
Divergent
approaches to privacy, cybersecurity,
competition and AI governance can raise trade costs.
·
Carbon
pricing, environmental standards, subsidies and border adjustment measures can interact
with WTO non-discrimination principles.
·
The challenge
is increasingly about behind-the-border
policies, rather than traditional tariffs alone.
·
Supply-chain
concentration, technological rivalry and national/economic security concerns are
encouraging governments to:
o Reduce import dependence
o Restrict technology flows
o Limit investment.
·
Expanding
use of national-security justifications makes it harder to distinguish legitimate
policy space from unilateral trade action.
·
Measures
intended by one country to reduce vulnerability can increase perceived vulnerability
in other countries, creating a cycle of restrictions.
·
The report
does not recommend specific
reforms, but argues that WTO rules, commitments and practices need
to adapt to today's economy.
·
The objective
is to repair what is broken,
update what is outdated and preserve what works.
·
The report
concludes that the economic system created by the WTO makes renewal of rules-based
cooperation more urgent,
not less.
The WTO
World Trade Report 2026 argues that the multilateral trading system remains economically
valuable, but its rules and institutions have not adapted fast enough to a world
characterised by dispersed economic power, subsidies and industrial policy, digital/AI
trade, environmental measures and geopolitical rivalry. The report's central economic
finding is that erosion of multilateral cooperation could impose substantial costs
on global GDP and trade, while stronger cooperation could generate significant gains.
The 2026 edition
of the World Trade Report - issued on 15 September - finds that a strengthened multilateral
trading system could increase global GDP by roughly 3% or USD 3 trillion by 2050,
while inaction to modernize the trading system could reduce global output by up
to 10%. The flagship publication of the WTO Secretariat, examining what the multilateral
trading system has delivered over 80 years and where it is facing challenges, offers
evidence relevant to ongoing efforts to keep trade rules fit for purpose.
The multilateral
trading system has delivered enormous benefits over the past 80 years, helping to
create a more integrated and resilient global economy," said WTO Director-General
Ngozi Okonjo-Iweala. "The evidence shows that around 72% of global merchandise
trade still takes place under the WTO's most-favoured-nation terms, while WTO-led
trade cooperation has supported economic growth, helped narrow income gaps between
developing and advanced economies, and contributed to peace among members."
"The
global trading landscape has changed significantly but the founding logic of the
system, that all economies are better off cooperating rather than acting unilaterally,
remains as relevant today as ever," she said. "WTO members are now engaging
actively on reform in full recognition that the status quo is not an option. The
multilateral trading system has been repaired and renewed before, and I believe
it can be again."
The publication
titled, "World Trade Report 2026: A
Critical Juncture for the World Trading System," presents three scenarios
for the future of the global trading system. A scenario of a strengthened multilateral
framework could raise global GDP by 2.9% and global exports by 17.9% by 2050 relative
to the baseline trajectory. This scenario assumes a world where WTO rules are strengthened
through broader market-opening commitments, new multilateral disciplines in digital
trade and services, wider membership, and a calibrated framework that balances trade
openness with security concerns.
For least-developed
countries (LDCs), which currently account for less than 1% of world trade, the gains
could be particularly significant. Under this scenario, LDCs' GDP is projected to
increase by 7.7% due to benefits they would derive from tariff and other trade cost
reductions. High-income economies stand to gain substantially in absolute terms,
with projected GDP gains of about US$ 1.7 trillion in 2023 dollars, reflecting in
particular the benefits of lower trade costs in services.
The two
other scenarios cover simulations where multilateral trade rules are eroded: a "geo-fragmented
world" (-5.1% and -18.6% declines in GDP and exports respectively), in which
trade cooperation is organized around geopolitical blocs; and a "free trade
agreement (FTA) world" (-6.9% and -26.9% declines in GDP and exports respectively),
in which multilateral cooperation is replaced by a network of FTAs. Comparing these
scenarios provides an indication of both the costs of losing the WTO and the potential
gains from deeper cooperation.
This implies
that the gap between strengthened multilateral cooperation and erosion of the multilateral
trading rules is equivalent to an opportunity cost of roughly -5 to -10% of global
real GDP, depending on the scenario.
The report
argues that many of the challenges confronting the multilateral trading system today
are a consequence of its own achievements. Over the past eight decades, the system
has helped reduce trade barriers, support a nearly 50-fold expansion in global trade,
and create a more open, integrated and rules-based global economy. WTO membership
has also been associated with increased trade between members, greater resilience
during economic crises, and a peace-promoting effect through rules-based cooperation.
According
to the report, the same developments that have strengthened the global economy have
also made cooperation more complex. The report identifies four developments: shifts
in economic power; the growing prominence of government interventions, such as industrial
policy, and level-playing-field concerns; changes in the nature of trade driven
by digitalization, global value chains and
the environmental transformation; and rising geopolitical tensions.
While
the report does not prescribe a blueprint for WTO reform, it highlights areas where
adaptation of trade rules may be needed. It concludes that preserving the benefits
of the multilateral trading system does not mean preserving the status quo. Rather,
the challenge for WTO members is to adapt rules-based cooperation to a more integrated,
multipolar and diverse global economy while preserving the openness, predictability
and fairness that have underpinned the system's success.
The
report was launched on the first day of the Public Forum on 15 September. Director-General
Ngozi Okonjo-Iweala, opening the event, said: "As members move forward with
WTO reform, this difficult moment for the trading system has the potential to become
a turning point for renewal and revitalization. The World Trade Report explains,
with factual rigour and historical depth, what the system has delivered, and where
the mechanisms are now under strain."
DG Okonjo-Iweala
added: "A lesson from the report that feels particularly relevant today is
that members have repaired and renewed the GATT/WTO system before. It is in their
power to do so again. So let's not be fearful: the system has faced challenges before
and has been able to renew and revitalize itself. We can do it again."
WTO
Chief Economist Robert Staiger presented key findings of the report. The presentation
was followed by a discussion of the panel comprised of Ambassador Kumar Iyer of
the United Kingdom, Ambassador Manuel Teehankee of the Philippines, Dr Pinelopi
Goldberg of Yale University, Dr Mona Paulsen of the London School of Economics,
and Andrew Wilson, Deputy Secretary General (Policy) and Global Policy Director
of the International Chamber of Commerce.