WTO warns rules-based trade erosion could cut global GDP by up to 10%

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WTO warns trade rules erosion

Highlights

The WTO World Trade Report 2026 warns that erosion of rules-based trade could reduce global GDP by up to 10%.
Low- and middle-income economies increased their global trade share from 23% in 1995 to 45% in 2024, while digitally delivered services now represent 55% of services exports.
Under a geo-fragmentation scenario, global GDP could fall 5.1% and exports 18.6% by 2050, with disproportionately negative effects on smaller and poorer economies.

Trade report outlines system’s economic value

As reported by the World Trade Organization, the World Trade Report 2026 says about 72 per cent of global merchandise trade still takes place under the WTO’s most-favoured-nation tariff terms, under which any trade advantage granted to one member must be extended to all others.

The report says empirical estimates suggest GATT and WTO membership has increased trade between members by about 140 per cent. It also says low- and middle-income economies’ share of global trade has nearly doubled over the past three decades, rising from 23 per cent in 1995 to 45 per cent in 2024, while digitally delivered services have grown more than fivefold since 2005 and now account for about 55 per cent of global services exports.

The WTO says its framework has supported lower and more predictable trade costs through tariff commitments, transparency requirements and agreements covering services, intellectual property, product standards and trade facilitation. The report adds that economies undertaking deeper reforms during WTO accession grew on average 1.5 percentage points faster than members without a comparable accession process.

It also points to broader welfare effects, citing research that links WTO membership to about U.S.$855 billion in global prosperity gains and average GDP gains of roughly 4.5 per cent per member. For developing economies, the report says lower trade costs contributed to income convergence and helped support a sharp fall in extreme poverty over recent decades, even as least developed countries still account for less than 1 per cent of global trade.

Structural shifts raise pressure on multilateral rules

The report says the economic logic behind WTO cooperation remains intact because unilateral trade restrictions can impose costs on trading partners and lead to excessive protection collectively. It argues that reciprocal bargaining, most-favoured-nation treatment, tariff bindings, transparency and dispute settlement have helped governments manage those pressures through common rules rather than unilateral retaliation.

At the same time, the WTO says the system is under strain because economic power is now more widely distributed, differences in economic systems and state intervention have become more prominent, global value chains have deepened cross-border interdependence and geopolitical rivalry has reshaped trade policy. It adds that concerns around supply-chain concentration, critical technologies and economic security are changing how governments view openness.

The report compares possible long-term outcomes and says an enhanced-cooperation scenario would leave global GDP 2.9 per cent above baseline and exports 17.9 per cent higher by 2050. Under a geo-fragmentation scenario, global GDP would be 5.1 per cent lower and exports 18.6 per cent lower, with smaller and poorer economies expected to bear a disproportionate share of the losses.

The WTO also acknowledges weaknesses in the current framework, including incomplete notifications of trade measures, stalled negotiations and an Appellate Body that is unable to hear appeals. Still, it says the costs of allowing the rules-based system to erode would be significant, reinforcing the case for adaptation rather than abandonment.

In our earlier article on Québec’s Q2 2026 GDP growth, we covered how a stronger trade balance helped lift output even as inventories dragged on momentum. We noted that exports rebounded and imports rose more slowly, making external demand a key support alongside household and government consumption.

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