Business Bayani PH

The World Trade Organization (WTO) is facing a crisis of relevance as its member states struggle to agree on updates to its rulebook. This gridlock, according to a new study by Oxford Economics commissioned by the International Chamber of Commerce (ICC), could have severe consequences for developing economies.

The study estimates that a collapse of the WTO could lead to a one-third reduction in developing countries’ exports by 2030. This decline is linked to two main factors: increased protectionist policies by governments and a rise in trade barriers due to greater uncertainty.

Developing countries, especially the poorest, would be hit the hardest. The study predicts a 43% drop in exports for low-income countries by 2030 compared to a scenario where the WTO remains functional. This is because the WTO currently provides them with crucial benefits like access to new markets and preferential treatment.

ICC Secretary General John W.H. Denton AO said, “This study shows what is ultimately at stake – if the international community is serious about promoting global sustainable development, we must stop any further erosion of WTO rules and strengthen the multilateral system through successful reform of the organization. It is high time to move beyond national positions and collaborate in our shared global interest.”

The economic impact wouldn’t stop at exports. The study suggests a 5.1% decline in overall GDP for developing countries by 2030 if the WTO dissolves. This slowdown would be caused by reduced trade and investment, hindering economic growth and poverty reduction efforts.

One of the lead authors of the study, Lloyd Barton, head of Thematic Macro Consulting at Oxford Economics, said the WTO system has become so ingrained that people might not realize its importance. He emphasized that the WTO’s rules are essential for creating a reliable and predictable trading environment for businesses and consumers. 

The study’s results, according to Barton, show just how crucial the WTO is for developing countries. By enabling trade, the WTO helps these nations grow their economies.

The WTO’s current challenges threaten the progress made by developing countries in closing the income gap with developed nations. A weakened WTO could also disrupt global supply chains, impacting producers in developed countries as well.

The study emphasizes the urgency of WTO reform to maintain a stable and predictable trading environment, particularly for developing economies that rely heavily on international trade for growth.Ⓒ