World Trade Regimes IIMarch 13, 2013

GlobalizationAn important context of contemporary international trade is the phenomenon of globalization

Globalization: the increasing integration of the world in terms of communications, culture and economics

GlobalizationWhile globalization an important context for world trade and can serve to increase it,, several caveats should be kept in mind: International trade does not depend upon

globalization– can be regional or bilateral, and took place before globalization started.

Globalization not a recent phenomenon, or even a 20th century phenomenon. It has almost never been the case that the world has been constituted totally by small geographical units with their own peculiar systems.

GlobalizationIntegration over large areas of territory, in the form of standardized weights, measures, language, law, commercial practices and other economically relevant doctrines took place under the Roman and Chinese empires, as well as under various Islamic empires in the Middle East.

International TradeIt is also, of course, not the case that large scale trading was absent before modern times. Egyptians, Greeks, Romans, and Chinese engaged in international trade in ancient times.Modern international commerce (in terms of global = east/west trade) had its beginnings in the European Middle Ages, as merchants from Italy and the Mediterranean area went East in search of spice, silk and other luxury goods.

International TradeThese initial efforts were soon joined by trading expeditions from other countries. These often turned into commercial and colonial empires for various European countries (Spain, the Netherlands, Portugal, France and England).These empires acted in general like ancient empires in developing trade across large geographical distances, and introducing integration of culture, technology, law, monetary units, weights and measures, etc.

Industrialized International TradeOne means by which modern international trade became more integrated (and thus globalized) and increased in volume is through the impact of the industrialization.

Industrialization: use of energy to power machinery to create goods, including new machinery.

Industrialization Increased productivity and efficiency Increased amount of goods available for

trade Created new, more efficient means of

transportation and communication that served to tie distant areas of the world together.

British EmpireBy the early 19th century, Britain had succeeded earlier empires (Dutch, Spanish) as the commercially and geographically largest, encompassing India and other parts of South Asia, an important sections of the Middle East and Africa.Not only was trade important among the different parts of the British empire, but other aspects were important anticipations of future globalization:

British Empire Introduction of standard laws and practices that were,

nonetheless, could be modified by context. Spread of British culture, language and ideologies

through the different areas of the empire Use of machine-based transportation and

communications. Introduction of a standard reserve currency into which

other currencies could be converted at a set value. Promotion of internal free trade within the imperial

area. British military as the ultimate enforcer of order

USAfter WWII and the decline of the British, the US took over as the most important supporter of a world economy.Like Britain, the US supported globalization in the form of: Promotion of standard rules and practices Spread of English and American culture Promotion of American political and economic practices Dollar as reserve currency Dependence on new technology to tie together parts of

the world Use of military as the ultimate enforcer of order

US vs. BritainHowever, the US as leader of a globalized or globalizing world order was somewhat different than Britain: Rejection of the concept of a formal, territorial

empire. Reliance, at least in part, on international

institutions Inability to enforce free trade and inconsistent

commitment to the concept itself Use of military to enforce a global rather than

imperial order

Integration after the Cold WarThere were important limitations to considering the world globalized economically or otherwise before the end of the Cold War: Incomplete integration of former colonial nations

and newly industrializing nations as full participants

Soviet Union and its allies only partly integrated due to their own system of commercial interaction and different economic systems

PRC not integrated

Integration After Cold WarGlobalization and world trade has rapidly increased over the past 20 or so years: Fuller integration and industrialization of

developing countries (particularly India and Southern/Latin American countries)

Integration of Russia and PRC Rapid technological developments, including

computer and telephone technology and the spread of the internet.

Wider acceptance of market-based economic policies and free trade principles.