The WTO’s Rules Still Hold Most Trade Together: Can They Survive a More Divided World?

Global trade has changed faster than the agreements meant to govern it. The WTO still provides tariff rules for most merchandise trade, but governments now clash over subsidies, technology, security and environmental policies that can reshape competition far beyond their own borders. The result is a growing gap between the trade disputes countries face and the bargains they have been able to make.

This gap is the focus of World Trade Report 2026: A Critical Juncture for the World Trading System, published by the WTO Secretariat rather than an academic journal. Its main authors are Marc Bacchetta, Michael Blanga-Gubbay, Eddy Bekkers, John Hancock, Kathryn Lundquist, James Munro, Roberta Piermartini, Stela Rubínová, Fulvio Silvy, Donal Smith, Victor Stolzenburg and Danchen Zhao.

The report warns: as economic power spreads across more countries, failure to update shared rules could leave the smallest economies most exposed to trade deals shaped by larger powers.

Global trade still depends on rules governments struggle to renew

About 72 per cent of global merchandise trade still takes place under most-favoured-nation tariff terms, according to the report. These commitments generally give eligible WTO members the same tariff treatment, providing a common baseline for trade beyond individual deals. For exporters, that baseline can be especially valuable when relations between major economies become less predictable.

The WTO's difficulty is therefore more complicated than institutional decline. Members continue to use its rules and forums, yet they have found it hard to reach agreements that match changes in how trade works. The last comprehensive overhaul of the system concluded in 1994, before today's scale of digital services, interconnected production and climate-related trade policy.

Much of the earlier system was built around reciprocal bargains: a government reduced barriers to its market in exchange for better access abroad. Those exchanges are harder to balance now. Some economies made extensive tariff reductions in past negotiations, while others retained greater room to raise rates beneath their legally committed ceilings.

Economic power has shifted as well. Low- and middle-income economies now account for 45 per cent of global merchandise trade, nearly double their share in 1995, the WTO reports. More countries have a consequential stake in negotiations, but they do not share the same market power or development needs. An agreement that looks balanced to a large exporter may look very different to an economy with limited capacity to negotiate or comply.

The toughest disputes begin behind the border

Government support for an industry may lower its costs at home and alter competition abroad. Privacy or cybersecurity rules may govern domestic activity while affecting services supplied from another country. Environmental standards can advance national climate goals and impose costs on foreign producers. None of these questions can be resolved simply by exchanging tariff cuts.

The report describes a growing challenge in managing differences between economic systems. WTO members are free to make different choices about the state's role in markets, but those choices can affect the value of market access promised to trading partners. A country concerned about subsidised imports has some measures it can use at its own border. Addressing the effect of another country's subsidies in third-country export markets can be more difficult.

Even establishing the facts can be contentious. Between 2015 and 2024, only 59 per cent of WTO members submitted required subsidy notifications, according to the report, and 77 per cent of those submissions were late. A missing notification does not establish that support is improper. It does make it harder for governments to assess its scale, judge its effects and negotiate on a shared evidence base.

Security concerns add another layer. Governments may seek to reduce dependence on particular suppliers or restrict sensitive technology flows, while their trading partners may see those measures as barriers. The WTO recognises room for security policies, but the report warns that wider use of such measures makes the boundary between legitimate protection and unilateral restriction harder to manage. Each government's attempt to reduce its own exposure can increase another's sense of vulnerability.

Poorer economies have the most to lose from separate deals

The report's economic simulations put a scale on the risks of fragmentation. In a scenario where trade cooperation splits into geopolitical blocs, global GDP is 5.1 per cent lower and exports 18.6 per cent lower than the model's baseline by 2050. In another scenario, where free trade agreements replace the WTO, global GDP is 6.9 per cent lower. These are modelled possibilities under specified assumptions, not forecasts.

The distribution of those losses is as important as the global total. The WTO finds that smaller and poorer economies would be especially exposed to a world organised around blocs and separate bargains. Large markets can offer access that strengthens their negotiating position. Countries with less to offer individually have a stronger interest in rules that apply across a broad membership.

However, defending shared rules cannot mean overlooking who has missed out under the existing system. Least-developed countries still account for less than 1 per cent of world trade, the report says. Within developed economies, some workers and communities have faced sustained losses linked to import competition and technological change, while new export opportunities have not necessarily reached the same people or places.

Lower barriers may create opportunities, but countries also need the capacity to meet standards, move goods efficiently and help workers adapt when industries change. Without those domestic foundations, an economy may participate in an open trading system and still capture a limited share of its benefits.

Reform will be judged by the bargains members can make

The WTO report does not offer a blueprint for reform. It identifies the pressures that members must negotiate: better transparency over government support, workable treatment of different economic models, rules relevant to digital and environmental trade, and development provisions that reflect substantial differences among countries. Progress in one area may depend on concessions in another.

Dispute settlement will also test whether members can restore confidence. The WTO's Appellate Body has lacked the quorum to function since December 2019, although governments continue to use other routes to address disagreements. A system of commitments is less predictable when members cannot agree on how disputed obligations should be reviewed.

The report's most revealing tension is that the WTO's difficulties arise partly from changes its earlier success helped enable. More economies trade at scale; more products depend on cross-border networks; more domestic policies affect foreign firms. The case for cooperation grows stronger as those connections deepen, while reaching agreement among differently situated members becomes harder.

The next measure of the WTO's relevance will be whether members can disclose more about the policies that concern one another, settle disputes credibly and negotiate obligations they regard as fair. Without that work, the rules governing much of today's commerce may remain in place even as the hardest trade conflicts move beyond their reach.