5 important WTO Warnings: Global Trade Disruption and MFN Principle Decline

The unprecedented disruption to global trade rules highlighted by the World Trade Organization chief reflects a sharp decline in the share of world trade conducted under the Most Favoured Nation principle. This principle, central to the WTO framework, ensures equal treatment among member countries by extending any trade concession granted to one member to all others. Its weakening signals a shift toward fragmented, preferential, and bilateral agreements that bypass multilateral rules.

Driving this disruption are escalating tariffs, trade wars among major economies, and a surge in protectionist policies since the pandemic and geopolitical tensions. The fall in MFN-based trade undermines predictability, increases transaction costs, and fosters bloc-based competition, leaving smaller and developing countries at a disadvantage due to limited negotiating power.

The WTO chief warned that the full effects of this erosion may only become visible in the coming year, with risks of slowing global trade growth, heightened disputes, and further marginalization of multilateral institutions. If left unaddressed, the multilateral trading system could face its most serious legitimacy crisis since its creation, pushing nations further toward fragmented trade regimes.

1. Sharp decline in MFN principle threatens multilateral trade rules
2. Rising tariffs and protectionism drive unprecedented disruption
3. Trade wars among major economies escalate global instability
4. Developing countries face greater risks and disadvantages
5. Full impact of tariff hikes will hit in 2026, deepening uncertainty