International trade and the trading system are undergoing major changes. While the Doha Round of negotiations, focussed on agriculture, tariffs, and trade facilitation continues in Geneva well into its seventh year, and new regional or bilateral trade arrangements make headlines regularly, realities on the ground, particularly the proliferation of global value chains and the changed dynamics of economic power relationships, suggest that future international trade negotiations will have to include important issues that have not been on the Doha table--investment, improved product and health standards, stitching together regional agreements into an integrated world-wide framework, addressing trade implications of climate change, as well as improvements in the structure and procedures of the World Trade Organization. The WTO, a critical piece of the architecture of global governance, must adapt to the new realities of international commerce.
Le systeme de commerce et d'echanges internationaux connait des transformations majeures. Alors que la ronde de negociations de Doha portant sur l'agriculture, les tarifs et la facilitation du commerce se poursuit a Geneve pour la septieme annee, et que des nouveaux accords commerciaux regionaux ou bilateraux continuent a defrayer regulierement les manchettes, les realites sur le terrain, en particulier la proliferation des chaines de valeur mondiales et la nouvelle dynamique des rapports de force economiques, laissent entendre qu'a l'avenir les negociations commerciales internationales devront inclure des enjeux importants qui n'ont pas ete abordes a Doha--l'investissement, l'amelioration de normes en matiere de produits et d'innocuite, rapiecer ensemble des ententes regionales en les integrant a un cadre integre d'envergure mondiale, traiter des repercussions des changements climatiques sur le commerce, ainsi que des ameliorations a apporter a la structure et aux mecanismes de l'Organisation mondiale du commerce. L'OMC, une piece essentielle de l'architecture de la gouvernance mondiale, doit s'adapter aux nouvelles realites du commerce international.
Although over-shadowed in recent months by worries about the state of the US economy and the tumultuous global financial situation, continuing concern has been expressed over the past two or three years, both within the media and amongst those following trade issues more specifically, about the prospects for the current global trade talks and the future of the world trading system itself. The concern centres on the possible collapse, suspension, or prolongation of the now six-year-old global trade negotiations (the Doha Round), the impact of possible failure or delay on the credibility of the World Trade Organization (WTO) under whose auspices the negotiations are taking place, and the fact that regional trading arrangements are proliferating around the world, resulting in a global patchwork of international trade rules. (1)
The concern also extends now to the highly volatile exchange rate movements of recent months, and their possible negative impact on trade flows, on countries' trade policies and on globalization more generally--President Sarkozy of France has said that there could be an "economic war" if international exchange rates were not better aligned in very short order, while successive United States Treasury Secretaries and other G-7 officials have been calling in particular for more flexibility in Chinese exchange rate policy. Equally worrying to many are pronouncements from several leading US presidential candidates and some in the Congress of the United States that existing trade agreements to which the US is a party should be re-evaluated and/or amended to better serve its interests and to harness the impact of globalization more fairly.
A further major concern, especially on the part of those emphasizing the continuing need for a reduction in world poverty, is the potential impact of the failure to conclude the Doha Round of global trade talks on the longer-term economic prospects of the less-developed countries, many of which have yet to be fully integrated into the world economy. Others argue that trade and globalization more generally, while perhaps helping to reduce world poverty, are putting downward pressure on wages and salaries in the high-income, industrialized world and causing or contributing to the disappearance of jobs in broad swatches of the manufacturing and services sectors.
In this article I will address some of these points by highlighting how the world economy is evolving and thus how negotiating issues and constraints imposed by 20th century thinking should be subsumed into a new, forward-looking agenda to confront the challenges now facing the international community. For the global economy is indeed changing rapidly with major implications for trade policy and for the trade policy regime. Increasingly, business across borders involves activities broken down into very small components of either a good or of a service, not a final, finished export or a final import. Further, global economic power is shifting slowly but steadily towards the large, emerging countries such as China and India as well as to smaller, high-growth economies, and ever-so-slowly away from the high-income, industrialized G7/OCED countries. (2) These two facts of global corporate re-structuring and shifting global power alone suggest that the world is in a transformational phase and that new thinking and new approaches to trade policy are required. While trade issues of the last half-century, such as agriculture and industrial tariffs remain important, they have been joined by other issues that will have to become part of the trade policy agenda in the future.
Some of the salient history of the current global trading system will first be presented, followed by a review of the intellectual basis underpinning trade policy, which continues to evolve as the on-the- ground reality of the world economy changes. How the structure and organization of business internationally is evolving will follow. The growth of the dynamic emerging countries, especially China, will then be highlighted. Comments on how all these changes will affect the trade agenda and international governance arrangements relating to trade in these early days of the twenty-first century will conclude the paper.
A BRIEF HISTORY
International trade has been a major contributor to peoples' incomes and well-being, a source of international cooperation, and has provided a variety of choice to industrial users and to individual consumers for hundreds of years. Indeed, the movement of goods and services in the Mediterranean two thousand years ago, followed by the development of trade routes within Arabia, across the Indian Ocean, between Europe and China along the Silk Road, down the rivers of Russia to Constantinople, and along the Chinese coast and beyond into south-east Asia, bears-witness to the long history of the importance of international trade. The so-called Age of Discovery, involving first Portuguese, then Spanish, French and British traders and investors led to the further expansion of trade, often organized in giant trading companies such as the Dutch East India Company or the Hudson's Bay Company. By the nineteenth century, the volume of trade took another dramatic leap forward with the products of the Industrial Revolution, particularly from the United Kingdom, going to all parts of the world. This growth of trade during the nineteenth century--referred to by some as the first great wave of globalization--was underpinned by improved technology and communications--the telegraph in particular--by the introduction of the steam engine to replace wind and sail from the 1840's on, and by the Royal Navy, which kept the world's sea lanes open. This first wave...