$3 trillion gain or a 10% GDP loss? WTO sounds a trade alarm

A strengthened multilateral trading system could increase global GDP by roughly 3% or USD 3 trillion by 2050, while inaction to modernise the trading system could reduce global output by up to 10%, as per the 2026 edition of the World Trade Report published on Tuesday.

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.

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"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."

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"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."

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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.