Global Trade Disruption: WTO Under Siege

The World Trade Organization (WTO) is witnessing its most significant upheaval since World War Two as the share of global trade conducted on WTO terms has decreased to 72%. This trend follows a series of new tariffs levied by the United States on its trading partners under President Donald Trump's administration. Data from the WTO indicates a reduction from about 80% of trade being conducted under the WTO's Most Favoured Nation terms.

Director-General Ngozi Okonjo-Iweala expressed concern about the decline, noting that the historic disruption has cast doubts over the predictability and validity of the global trading system. Despite the challenges, Okonjo-Iweala emphasized the importance of continuing trade on MFN terms, as a majority of trade remains in this category. However, she warned of potential future impacts stemming from these tariff changes, projecting that such effects could manifest by 2026 as stored goods deplete.

In her second term, Okonjo-Iweala is focused on WTO reform and managing the organization's budget constraints, prompted by potential funding cuts from the U.S. She also highlighted China's openness to industrial policy discussions as crucial for progress. A major deal to reduce fisheries subsidies is anticipated to mark the WTO's first global agreement since 2017, awaiting final ratification.