WEF report: Geopolitical tensions strain global trade, capital flows

The WEF's Global Cooperation Barometer 2026 highlights uneven progress. Trade is resilient but FDI is strained by geopolitical tensions. Innovation is strong but risks fragmentation, impeding shared progress and widening technology gaps.

Global cooperation in critical economic and technological domains continues to show uneven progress amid rising geopolitical tensions and structural uncertainties, according to the Global Cooperation Barometer 2026 released by the World Economic Forum. The report evaluated cooperation across five pillars, Trade and Capital, Innovation and Technology, Climate and Natural Capital, Health and Wellness, and Peace and Security, tracking developments through a data-driven index.

Trade and Capital Flows Under Strain

Among these, Pillar 1 (Trade and Capital) and Pillar 2 (Innovation and Technology) reveal contrasting dynamics shaping the global economy. The report notes that global trade flows have demonstrated relative resilience despite persistent protectionist pressures and geopolitical fragmentation. While merchandise trade volumes have recovered from pandemic-era disruptions, the report highlights that growth remains below long-term historical averages, reflecting supply chain realignments and strategic decoupling among major economies.

Capital flows, particularly foreign direct investment (FDI), remain under strain. The report points to a continued decline in cross-border investment, driven by higher interest rates, policy uncertainty, and increased national security screening of foreign investments. Emerging markets have been disproportionately affected, with reduced access to long-term capital constraining infrastructure and industrial expansion.

The Barometer also flags rising fragmentation in financial systems, as sanctions regimes, divergent regulatory standards, and regional trade blocs reshape global capital allocation. According to the report, this trend risks undermining efficiency and increasing costs for businesses, particularly those operating across multiple jurisdictions.

Despite these challenges, the report highlights areas of cooperation, including coordinated actions by multilateral development banks and selective progress in digital trade frameworks. However, it cautions that without renewed commitment to open and predictable trade rules, global growth prospects may weaken further.

Innovation Amid Intensifying Competition

Pillar 2 in the report presents a more nuanced picture, marked by strong innovation momentum alongside intensifying competition. The report finds that global investment in research and development remains robust, driven largely by advances in artificial intelligence, semiconductors, biotechnology, and clean technologies.

At the same time, the report warned of growing technological fragmentation. Divergent standards, export controls, and restrictions on technology transfers are increasingly shaping innovation ecosystems. This, the report notes, could slow the diffusion of critical technologies and widen capability gaps between advanced and developing economies. Collaboration in scientific research continues in areas such as climate modelling, public health, and space exploration. However, cooperation in frontier technologies is becoming more selective and geopolitically aligned.

A Call for Balanced Governance

The report highlighted concerns that reduced openness in technology flows may limit global productivity gains and impede collective responses to shared challenges. The Barometer emphasizes the need for balanced governance frameworks that protect national interests while preserving global innovation networks. It calls for renewed dialogue on technology standards, data governance, and ethical AI to prevent a bifurcation of the global technology landscape. Strengthening global trust, revitalizing multilateral institutions, and fostering inclusive innovation are identified as critical priorities to prevent further erosion of economic and technological cooperation. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)