By Sharon Atieno Onyango
A strengthened multilateral trading system could increase global GDP by an estimated US$ 3 trillion (3%) by 2050, while lack of reforms to modernize the World Trade Organization (WTO), could lead to a 10% reduction.
This is according to the 2026 World Trade Report titled ‘A Critical Juncture for the World Trading System’. It looks at what the multilateral trading system has delivered over 80 years and where it is facing challenges while offering 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 Dr. Ngozi Okonjo-Iweala, WTO Director-General.
“The evidence shows that around 72% of global merchandise trade still takes place under the WTO’s most-favoured-nation (MFN) 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 report shows that where WTO rules are improved 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, the global GDP would increase by nearly 3% while global exports would rise by nearly 18% by 2050.
Under this scenario,the GDP of least-developed countries (LDCs) would 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.
Another scenario shows that fragmentation along geopolitical lines could reduce global GDP by around 5%. In a world where the WTO disappears and is replaced by a network of Free Trade Agreements (FTAs), the losses would be closer to 7%, with smaller and poorer economies suffering more damage than high-income ones.
“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,” said Dr. Okonjo-Iweala. “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 report identifies four structural developments that are putting particular pressure on the system. One of them is the changing distribution of economic power. Though integration into world trade has supported growth, development and income convergence and made the global economy less concentrated, it has also changed the negotiating landscape. Questions are emerging about reciprocity and MFN, rights and obligations, and development flexibilities.
The report emphasizes that special and differential treatment remains essential, while also noting that developing economies today range from least-developed countries with very limited capacity to globally competitive economies with significant market power. It calls for the need to achieve new bargains that reflect current economic realities without losing the development dimension of the system.
The second development is the growing role of government intervention and differences among economic systems. Robert Staiger, WTO’s Chief Economist notes that the scale, scope and prominence of industrial policy and subsidies have changed across a wide range of economies. Governments are intervening for reasons ranging from development and climate policy to technological leadership, resilience and security.
This development is placing renewed emphasis on workable subsidy disciplines and remedies while also calling for transparency. The share of WTO members that provided mandatory subsidy notifications to the Committee on Subsidies and Countervailing Measures was just 59 per cent between 2015 and 2024, and 77 per cent of these notifications arrived late. The average delay, though improved from the previous two decades, still exceeds a year.
“If members do not have reliable information about one another’s interventions, it becomes much harder to assess spillovers, maintain trust or negotiate solutions,” he said.
The third development is that trade itself has changed. Global value chains mean that a measure imposed in one economy can propagate through production networks across many. Services account for a growing share of trade. Digitalization has transformed how services are delivered. Artificial intelligence may accelerate that process. Environmental policies – including standards, subsidies, carbon pricing and border measures – can all generate cross-border effects.
Staiger observes that these developments create large economic opportunities but can create new cross-border policy challenges. Privacy, cybersecurity and consumer-protection rules all serve legitimate goals. But when national approaches diverge, they can fragment markets — forcing firms to duplicate compliance, localize data, or navigate incompatible rules across jurisdictions in ways the WTO framework was not designed to manage.
Cooperation over domestic regulation is also inherently harder than negotiating a tariff. The report finds that cooperation is becoming more complex at precisely the moment when deeper integration makes cooperation more necessary.
The fourth development is the rise of geopolitics. Governments are increasingly viewing trade through the lens of national and economic security: supply-chain concentration, access to critical technologies, resilience and dependence on geopolitical rivals.
According to the report, WTO rules recognize that governments require policy space to protect national security. However, as security rationales expand across more sectors and more policy instruments, it is becoming harder to draw the line between legitimate security policy and an increasingly broad escape from common rules.
There is also a collective-action problem. A measure one country takes to reduce its vulnerability can increase another country’s sense of vulnerability, producing a cycle of restrictions and retaliation.
The report does not assume geopolitical rivalry can be removed from trade policy but argues that rivalry does not eliminate the economic case for cooperation. Predictable rules may matter especially to smaller economies, which are particularly vulnerable to power-based bilateral bargaining.
“The central message of the World Trade Report 2026 is this: the world trading system is at a critical juncture not because cooperation has ceased to matter, but because cooperation now must work under much more demanding conditions,” Staiger concluded.
