The World Trade Organization (WTO) warned that if countries do not continue to reform and maintain the multilateral trading system, the global economy could lose up to 10% of its GDP by 2050. This warning comes in light of geopolitical developments and changes in global trade.
Major Disruptions in the Global Trading System
According to the WTO report, the global trading system is currently facing the largest disruptions in the past 80 years. Trade rules are being challenged on an unprecedented scale, a situation that has not been seen since the establishment of this organization after the Great Depression and World War II. In scenarios where multilateral trade rules are weakened, global GDP could decrease by 5.1% and exports could fall by 18.6%.
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The WTO predicts that in scenarios where trade cooperation between countries is organized around geopolitical blocs, global economic damage could reach 6.9% and global exports could drop by nearly 27%. These figures reflect the heavy costs resulting from the weakening of international trade cooperation.
Opportunities and Challenges of Reforms
WTO Director-General, Ngozi Okonjo-Iweala, stated that the multilateral trading system has already been repaired and innovated and can return to this state again. She added that WTO members are now actively considering reforms and that the current situation can no longer be accepted.
The WTO's warning about economic damages and declining exports comes at a time when trade disputes between global economic powers are increasing. Trade disputes between the United States and China, especially following the imposition of retaliatory tariffs worth hundreds of billions of dollars, have inflicted shocks on the global economy. Additionally, the United States has impacted trade cooperation agreements with other trading partners, including the European Union.
The WTO also points out that many of the current challenges facing the multilateral trading system stem from its own successes. This system has helped support nearly a 50-fold expansion of global trade over the past 80 years. Overall, about 72% of global goods trade is still conducted under WTO's "Most-Favored-Nation" conditions.
If member countries strengthen the multilateral trading system through WTO rule reforms, global GDP could increase by 3% or about $3 trillion by 2050. For low-income countries, which currently account for less than 1% of global trade, this increase would be significant, with their GDP expected to rise by 7.7% or $100 billion.
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