By Onu Okorie

World Trade Organization WTO has urged its 166 members to urgently reform global trade rules, warning that failure to do so could deepen fragmentation, weaken economic growth and disproportionately hurt poorer countries.
The WTO, in its annual report released on Tuesday, said the existing multilateral trading system was struggling to keep pace with major changes in the global economy, including shifting economic power, increased state intervention, digital trade and growing geopolitical tensions.
The warning comes after WTO members failed to agree on a reform package at a ministerial meeting in Yaoundé, Cameroon, in March. Negotiations have since resumed in Geneva on issues including decision-making, dispute settlement, subsidies and the growing role of governments in national economies.
The Geneva-based organisation has struggled to achieve consensus on reforms because its members are at different stages of economic development and often have conflicting interests.
According to WTO economic modelling, a world divided into competing geopolitical blocs could see global gross domestic product (GDP) fall by 5.1 per cent and exports decline by 18.6 per cent by 2050 compared with a more integrated trading system.
The consequences could be even more severe if multilateral cooperation collapses completely and is replaced by a patchwork of free-trade agreements. In such a scenario, global GDP could fall by 6.9 per cent, while exports could decline by nearly 27 per cent.
By contrast, stronger multilateral cooperation could increase global GDP by 2.9 per cent and boost exports by almost 18 per cent, the WTO said.
The organisation noted that least-developed countries stood to benefit most from stronger international cooperation, but would also face some of the biggest economic losses if global trade fragmented into competing blocs.
WTO Chief Economist Rob Staiger described the global trading system as being at a “critical juncture”, citing four major challenges: the broader distribution of economic power, increased government intervention in economies, changes in trade driven by digitalisation and global value chains, and rising political tensions.
“The rules are under strain and they really are having an impact,” Staiger told Reuters, warning that the economic costs could be substantial if the global multilateral system breaks down.
The concerns come amid growing trade tensions and the increasing use of regional and sector-specific trade agreements, as well as sweeping tariff measures imposed by the United States.
In March, a group of WTO members agreed to advance the organisation’s first baseline digital trade rules through a plurilateral agreement, despite opposition from some members.
Staiger said regional trade agreements and plurilateral initiatives could complement and strengthen the multilateral trading system, but cautioned that they could also undermine it if they evolved into competing geopolitical blocs.
He warned that, without a strong WTO framework, such arrangements could divert trade towards preferred partners instead of the most efficient producers, while encouraging countries to impose higher barriers on outsiders.
According to him, WTO rules remain important in limiting discrimination against countries outside trade agreements and in establishing boundaries for how free-trade agreements are structured.
The WTO also said trade policy uncertainty had reached unprecedented levels in recent years, as governments increasingly resorted to tariffs, subsidies, export controls and industrial policies to protect or promote domestic industries.
Despite the growing fragmentation, about 72 per cent of global merchandise trade still takes place under the WTO’s most-favoured-nation tariff terms, although this represents a decline from approximately 80 per cent in 2022.
Staiger described the decline as a “worrisome trend”, saying it highlighted the risk of a gradual erosion of the rules-based multilateral trading system.
The WTO maintained that renewed cooperation and reform of global trade rules would be critical to preventing fragmentation and ensuring that developing and least-developed economies continue to benefit from international commerce.