Two years ago, 80% of global trade in goods crossed borders based on agreed rules. Today, that figure has fallen to 72% . Eight points in twenty-four months, and with them a silent retreat of the entire architecture that was built after the Second World War.
The global trading system is experiencing “a defining moment” , the World Trade Organization warns in its annual report, underlining that a possible return to a unilateral trade policy would have significant costs.
“Global trade policy and the WTO are facing the most serious and sustained turmoil since the creation of the multilateral trading system 80 years ago,” the report said, echoing a statement made in March by Director-General Ngozi Okonjo-Iweala . The situation has not improved since then, amid a tariff war and rising geopolitical tensions, particularly in the Middle East.
In the foreword to the report, the head of the Organization openly expresses her concern. “We are witnessing a questioning of trade rules on a scale unprecedented since the creation, in the aftermath of the Great Depression and the Second World War, of the multilateral institutions that undertook to guarantee open, stable and predictable global trade.”
The WTO identifies four dynamics that have made cooperation between member states more difficult: the increasingly fragmented distribution of economic power , the growing diversity in the degrees and forms of state intervention in markets, the evolution of the very nature of trade with changes in global value chains, digitalization and environmental policies, and finally the rise of geopolitical tensions .
The simulation numbers are what give the real scale of the stakes. By 2050 , in a scenario of a “geopolitically fragmented world,” where the multilateral system will break up into geopolitically aligned blocs, global GDP will decline by 5.1% and exports by 18.6% .
Even worse is the scenario where multilateral cooperation is replaced by a network of bilateral free trade agreements and the WTO effectively ceases to function. Then global GDP falls by 6.9% and exports by 26.9% .
The opposite scenario, that of “enhanced global cooperation” , shows how much is at stake. With enhanced multilateral trade cooperation, world GDP could increase by 2.9% and exports by 17.9% . The gap between the best and worst scenarios is, in other words, more than nine GDP units.
The WTO also warns that the costs will not be shared equally. Smaller and poorer economies would be particularly vulnerable, as they have less bargaining power and less ability to participate in preferential blocs.
The organization’s chief economist, Robert Steiger , stressed the significance of the decline from 80% to 72%, speaking to AFP. “This trend is worrying and reflects the decisive moment we are experiencing,” he noted, adding another sign of pressure. New tariffs and trade restrictions now affect 11% of global imports , the highest rate in more than 15 years .
His most interesting observation, however, concerns Artificial Intelligence . Part of the resilience that global trade is currently showing is due, he explains, to the development of this particular technology, as the products required for it create huge trade flows. Servers, industrial equipment, computers. “This remarkable rapid growth in investment may partially hide the decline in global trade that would otherwise be observed,” he stressed.
This is a point with significant implications. If the good trade numbers are largely due to a single investment cycle, then the system is much more fragile than it seems. Steiger notes, moreover, that technology development remains concentrated in a few countries and may hide very different developments by region. And he warns that “the explosion of investment in artificial intelligence may be coming to an end, a possibility that is much talked about in economic and business circles, and it would therefore be risky to assume that everything is going well just because global trade continues to grow at a steady pace.”
The organization, which will release updated forecasts on October 8 , insists that it remains “an essential cog in the rules-based global trading system.” But its own report shows a cog that is gradually losing teeth.
