The first, in the spirit of Thoreau's quote above, is to keep it short. My intention is not to write another bulky tome on the World Trade Organization, free trade agreements FTAs , and other aspects of trade policy. Rather, it is to capture big trends, sum them up concisely, and communicate directly and engagingly to a broad audience of interested readers. The second objective is to give my account a non-Western, especially Asian, slant—hence the headline quote from Jan Tumlir, who was for a long period of time the director of research at the General Agreement on Tariffs and Trade and its informal in-house philosopher.
The classic themes of trade policy, revolving around free trade and protectionism, originated in the West and have been framed by the West for the rest of the world.
But the major challenges facing trade policy today come increasingly from outside the West, and particularly from a rising Asia. The 21st century, so we are told, is the Asian century. My last book. If the address matches an existing account you will receive an email with instructions to retrieve your username. Economic Record Volume 85, Issue Read the full text. Tools Request permission Export citation Add to favorites Track citation. Share Give access Share full text access. Share full text access.
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Volume 85 , Issue June Pages But the most consequential exploration was the circumnavigation by Magellan: it opened the door to the Spice islands, cutting out Arab and Italian middlemen. Potatoes, tomatoes, coffee and chocolate were introduced in Europe, and the price of spices fell steeply.
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Trade certainly started to become global, and it had even been the main reason for starting the Age of Discovery. But the resulting global economy was still very much siloed and lopsided. The European empires set up global supply chains, but mostly with those colonies they owned. Moreover, their colonial model was chiefly one of exploitation, including the shameful legacy of the slave trade.
New Frontiers in Free Trade: Globalization's Future and Asia's Rising Role | Cato Institute
The empires thus created both a mercantilist and a colonial economy, but not a truly globalized one. This started to change with the first wave of globalization, which roughly occurred over the century ending in By the end of the 18th century, Great Britain had started to dominate the world both geographically, through the establishment of the British Empire, and technologically, with innovations like the steam engine, the industrial weaving machine and more.
It was the era of the First Industrial Revolution. On the one hand, steamships and trains could transport goods over thousands of miles, both within countries and across countries. On the other hand, its industrialization allowed Britain to make products that were in demand all over the world, like iron, textiles and manufactured goods. The resulting globalization was obvious in the numbers.
And, Keynes also noted, a similar situation was also true in the world of investing. Those with the means in New York, Paris, London or Berlin could also invest in internationally active joint stock companies. One of those, the French Compagnie de Suez, constructed the Suez Canal, connecting the Mediterranean with the Indian Ocean and opened yet another artery of world trade. Others built railways in India, or managed mines in African colonies. Foreign direct investment, too, was globalizing. While Britain was the country that benefited most from this globalization, as it had the most capital and technology, others did too, by exporting other goods.
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They started to mass export meat, from cattle grown on their vast lands. Other countries, too, started to specialize their production in those fields in which they were most competitive. But the first wave of globalization and industrialization also coincided with darker events, too. In a similarly negative vein, large countries like India, China, Mexico or Japan, which were previously powers to reckon with, were not either not able or not allowed to adapt to the industrial and global trends.
Either the Western powers put restraints on their independent development, or they were otherwise outcompeted because of their lack of access to capital or technology. Finally, many workers in the industrialized nations also did not benefit from globalization, their work commoditized by industrial machinery, or their output undercut by foreign imports.
It was a situation that was bound to end in a major crisis, and it did. In , the outbreak of World War I brought an end to just about everything the burgeoning high society of the West had gotten so used to, including globalization.
The ravage was complete. Millions of soldiers died in battle, millions of civilians died as collateral damage, war replaced trade, destruction replaced construction, and countries closed their borders yet again. In the years between the world wars, the financial markets, which were still connected in a global web, caused a further breakdown of the global economy and its links.
The Great Depression in the US led to the end of the boom in South America, and a run on the banks in many other parts of the world. Another world war followed in The story of globalization, however, was not over.
The great convergence: the future of trade and globalisation
The end of the World War II marked a new beginning for the global economy. Under the leadership of a new hegemon, the United States of America, and aided by the technologies of the Second Industrial Revolution, like the car and the plane, global trade started to rise once again. At first, this happened in two separate tracks, as the Iron Curtain divided the world into two spheres of influence. But as of , when the Iron Curtain fell, globalization became a truly global phenomenon. In the early decades after World War II, institutions like the European Union, and other free trade vehicles championed by the US were responsible for much of the increase in international trade.