The WTO said existing rules have struggled to keep pace with shifts in economic power, the expansion of state intervention, digital trade and growing political tensions between major economies.
The warning comes after WTO members failed to reach agreement on a reform package at a ministerial meeting in Yaounde, Cameroon, in March. Negotiations have since resumed in Geneva, with discussions focused on decision-making, dispute settlement, subsidies and the role of government intervention.
The organisation's concern extends beyond the immediate effectiveness of the WTO. Its economists estimate that a fragmented global economy divided into competing geopolitical blocs could reduce global gross domestic product by 5.1% and exports by 18.6% by 2050 compared with a more integrated system.
Under a more severe scenario in which multilateral cooperation collapses and is replaced by a patchwork of trade agreements, global GDP could be 6.9% lower and exports almost 27% lower.
By contrast, stronger multilateral cooperation could increase global GDP by 2.9% and exports by nearly 18%, according to the WTO.
The consequences would be particularly significant for poorer economies, which rely heavily on predictable access to international markets and global supply chains. The WTO said least-developed countries would stand to gain substantially from stronger cooperation but could suffer disproportionately from fragmentation.
Trade policy uncertainty has increased as governments use tariffs, subsidies, export controls and industrial policies to protect strategic industries.
Although about 72% of global merchandise trade remains covered by WTO most-favoured-nation tariff terms, the proportion has declined from around 80% in 2022.
For businesses, the changing trade environment is increasing the importance of supply-chain diversification and regional market strategies. However, greater fragmentation can also increase costs by encouraging companies to prioritise political alignment over economic efficiency.
The WTO's warning therefore reflects a broader challenge facing the global economy: preserving an open trading system while adapting international rules to a more fragmented geopolitical environment.
