Trading
Global trade is at a historic crossroads. For 60 years after the Second World War, trade grew faster than economic output – clear evidence that the world economy was becoming ever more open and integrated – as countries steadily broke down the economic barriers between them in a succession of multilateral and regional initiatives. Moreover, this process of trade-led integration – or globalization – seemed to be accelerating. With the conclusion of the Uruguay Round, the expansion of the EU, the creation of the North American Free Trade Agreement (NAFTA) and the accession of China to the World Trade Organization (WTO), trade expanded at almost double the rate of gross domestic product (GDP) growth in the two decades after the mid-1980s – almost 6 % versus just about 3 %. It did not escape notice that this unprecedented period of trade-led globalization also coincided with an unprecedented period of global development, poverty reduction and economic expansion.
Since the onset of the 2008 Great Recession, the momentum of trade-led globalization appears to have markedly decelerated, raising alarming concerns regarding the prospective vitality of the global economy. The year 2016 signified the fifth consecutive annum in which the pace of trade growth either paralleled or trailed behind the rate of global output expansion – a phenomenon unprecedented in the post-World War II era. The Doha Development Round, over a span of 16 years, has witnessed scant advancement, while the United States' withdrawal from the Trans-Pacific Partnership (TPP) further epitomizes this trend. Concurrently, the Transatlantic Trade and Investment Partnership (TTIP) languishes in a state of abeyance. The future of the North American Free Trade Agreement (NAFTA) is shrouded in uncertainty, and the United Kingdom's decision to extricate itself from the European Union (Brexit) complicates the international trade tableau further. Collectively, these developments are interpreted as indicators that the trajectory of global trade integration is, at best, stagnating, if not subtly regressing.
Numerous factors have been posited to explain the apparent deceleration of global trade expansion, spanning from transient cyclical elements, like the enduring effects of the financial crisis on consumer and business demand, to more enduring structural shifts, such as the deceleration in the expansion of global supply chains. However, one aspect that has garnered surprisingly limited focus is the swift metamorphosis of global trade itself and the current trade system's struggles to adapt to this evolving landscape.
While the existing world trading framework was remarkably effective in facilitating the exchange of tangible goods and raw materials, thereby fueling the globalization of the 20th century, it has been markedly less adept at liberalizing trade in services, digital products, and data flows. These are the very elements that are at the forefront of 21st-century globalization.
Despite this, there are emerging indicators of the development of innovative models of trade cooperation and rule-making, steered by new alliances and stakeholders. These developments hint at the potential advent of a novel phase of trade liberalization, and globalization, suggesting that the global economy might be on the threshold of embracing a new era of trade dynamics.