WTO chief sees lasting impact on trade from Middle East war, geopolitics

Shifting geopolitics and the wars in Ukraine and the Middle East will have a lasting impact on global trade flows as companies seek alternatives to guard against future disruptions, World Trade Organisation (WTO) Director-General Ngozi Okonjo-Iweala has said.

Okonjo-Iweala said in an interview with Reuters on Thursday that trade had contracted sharply in the Middle East as a result of the Iran war, despite efforts to find alternative routes. She added that recovery would take time and some of the changes could become permanent.

The WTO has forecast a 17 per cent decline in exports in the region this year, while imports are projected to fall by about 15 per cent.

According to Okonjo-Iweala, private sector experts expect trade to rebound once the war ends and the Strait of Hormuz reopens, as it provides a cheaper route for transporting goods. However, repeated conflicts have highlighted the need for diversification and contingency planning, with some alternative routes likely to remain in use.

“We are finding that choke points and choke assets are things we have to think about for the world,” she said in an interview on the sidelines of the annual meetings of the International Monetary Fund and World Bank.

“I think some of these alternatives will stay because both countries and businesses want to hedge against eventualities,” she added.

Okonjo-Iweala said efforts to diversify trade across different regions and countries would continue amid repeated disruptions caused by wars and other factors, including the extensive tariffs imposed by United States President Donald Trump.

“There’s absolutely no doubt that supply chains have been reconfiguring,” she said, noting that business leaders had shown creativity in identifying alternative trade routes, although some were more expensive.

She added that some of the changes would endure because geopolitical realities had made diversification a sensible business decision.

Opportunity for intra-African trade

Okonjo-Iweala also predicted continued growth in regional trade, noting that African countries could significantly boost economic growth and create jobs by trading more among themselves.

“Africans trading among themselves can really create value, create jobs,” she said.

She noted that intra-African trade currently accounts for about 20 per cent of the continent’s total trade, compared with approximately 60 per cent of trade within the European Union.

Regional trade agreements are expected to continue advancing, although trade conducted under WTO rules still accounts for nearly three-quarters of global trade.

Last week, the WTO raised its forecast for global merchandise trade growth, citing strong demand for artificial intelligence-related products, which is helping offset the effects of disruptions caused by the widening conflict in the Middle East.

The organisation projected that global merchandise trade volume would grow by 3.9 per cent in 2026, up from the 1.9 per cent growth forecast in its baseline projections issued in March.

However, Okonjo-Iweala said the outlook remained uncertain because of ongoing conflicts, tariffs and concerns that the current boom in artificial intelligence could lose momentum or collapse.

“The impact of AI is masking the other tendencies in trade, which are not on the positive side,” she said.

Credit: Reuters