00:00A stark warning in the World Trade Report. It says failure to modernize the trading system
00:05could shrink the global economy by up to 10% by 2050. Now, 72% of global merchandise trade
00:14still takes place under the WTO's Most Favored Nation, or MFN, principle, which requires
00:21countries or sellers to treat all trading partners equally. But that's dropped from
00:2680% in 2022. The WTO says the world has changed and the rules must reflect this.
00:33Four major challenges are shaping global trade. Economic power is shifting between countries,
00:40there's growing state intervention in economies, rising geopolitical tensions,
00:44and factors like digitalization are changing the nature of trade. The World Trade Report found
00:51that with stronger cooperation, global GDP could be almost 3% higher by 2050, and exports can increase
01:00by nearly 20%. But weaker cooperation could be costly. If multilateral cooperation collapses and
01:08is replaced by a free trade agreement world, global GDP could fall close to 7%, and exports
01:15could be down around 27% by 2050. The least developed countries would suffer the most in this scenario.
01:23Well, Roberta Piermartini is coordinator of the World Trade Report and chief of WTO Applied Economic Research.
01:32For least developed countries, rather than 10% prediction of a 10% GDP loss, we predict about
01:42over 25% GDP loss. And this is because trade matters much more for these economies.
01:51WTO membership has significantly increased trade between members by about 140%. So if the system has
01:59delivered so much, what's actually holding countries back from cooperating further?
02:06So you're right. In the report we make clear that, and one of the central arguments of the report is
02:13actually that in part the WTO is victim of its own success. Some of the successes and the prosperity and
02:23the more integrated world economy that the WTO has created actually have modified the landscape in which
02:31the WTO operates in such a way that makes cooperation more difficult. And in the report we identify four of
02:39these developments in particular. One is the diversity of the distribution, the increase in diversity of the
02:46distribution of market power, the increase in government intervention, and the differences in economic system.
02:56Thirdly, a different nature of trade altogether. The fact that digital technologies,
03:05environmental concerns, and global value chains have changed the way we trade. And finally,
03:12economic security concern. The growing rivalry between governments make cooperation more difficult.
03:20You mentioned there AI and digital trade. Could these pull cooperation the right way rather than towards fragmentation?
03:32Certainly, AI and digital technologies are potentially a big source of gains and clearly increase the stake of what is
03:43to do and what are the gains from cooperation.
03:45That's increasing the incentive to cooperate. We just need to find ways to cooperate. And what we argue in the
03:52report certainly is not that there is less need of cooperation. Actually,
03:57as you mentioned, it makes cooperation, these changes make cooperation more important and make it also more difficult. Because the
04:07way countries regulate these technologies
04:12and with national domestic policies and with national domestic policies make it somehow more difficult to cooperate on behind the
04:22border measures than tariffs that we have worked on.
04:26No blueprint in the report for WTO reform, but how might that look?
04:33So, yeah, we don't really provide a blueprint, as you say in the report, but we do highlight some of
04:40the key questions that members have to have in the back of their mind to actually move forward and think
04:50of how can we cooperate among different systems?
04:54How can we find ways to align commitments to the current market power? How can we cooperate on behind the
05:05border measures? And how can we deal with rivalry, but at the same time, maintaining a flexibility that doesn't sort
05:15of undermine the rule-based system?
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