World Trade Regimes II

1. World Trade Regimes II March 13, 2013

2. Globalization An 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

3. Globalization While 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.

4. Globalization Integration 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.

5. International Trade It 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.

6. International Trade These 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.

7. Industrialized International Trade One 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.

8. 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.

9. British Empire By 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:

10. 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

11. US After 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

12. US vs. Britain However, 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

13. Integration after the Cold War There 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

14. Integration After Cold War Globalization 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.