Trend five: Trade and economics
The spread of international markets, technology and global value chains has led to an unprecedented increase in global prosperity, helping propel more people from poverty since 1990 than at any point in human history. The world, taken as a single economic entity, now enjoys unprecedented levels of wealth. Current agreed rules and institutions governing the international exchange of goods, services and capital, however, have in recent years come under increasing strain as the effects of globalisation become more politically contested.
While the global gains from globalisation are indisputable, in the West its distributive effects are increasingly debated, resulting in a progressively contentious discussion regarding the merits of open global markets and international cooperation anchored in shared rules, values and frameworks. Adverse distributional trends and industrial change within wealthy economies have, in some cases, led to a perception that globalisation has been responsible for a stagnation in real incomes and job destruction. This feeling is compounded by the growth in the share of wealth of higher earners and structural changes in traditional industries generated not only by trade but also by changes in technology and automation. However, while enthusiasm for globalisation may have waned in some constituencies in the West, in many areas of the developing world it retains both sustained public support and legitimacy.
As a result of these increasing tensions, both within societies and between states, the post-war multilateral framework may continue to come under increasing pressure in the years ahead, putting at risk the collective ability to manage increasing interdependence in an efficient manner. Given that the coming decades are likely to see the continuation of current economic and technological revolutions underway, with possible associated turbulence and radical change, the overall international context will be daunting, since the challenges will be interconnected, and, some cases, too big for individual states or even regions to address.
This has led to new questions of governance, stability and legitimacy in how global business, trade, investment, intellectual property and data flows are controlled and regulated, at all levels. Moreover, in an ever more connected and integrated world, additional issues related to globalisation on labour markets, human rights, good governance, consumer protection, financial stability and the environment will need to be addressed to ensure that developments in the global economy do not imperil sustained public and political support for cross border trade, investment and capital flows.
Feedback - Trade and Economics breakout
Key discussion points
- Bilateralism vs Multilateralism
- Certain members of the multilateral system now prefer to negotiate bilateral agreements rather than focus on multilateral or plurilateral initiatives.
- Proliferation of preferential trade agreements likely to continue in the short to medium term and address more trade in services as well as goods.
- The return of power politics.
- Weakening of the rules based system will favour strong actors over weak.
- Mid-sized countries will need to work in concert in order to project their influence and values.
- Tripolar system of US, EU and China will increase regionalisation of trade standards and norms in their respective economic zones.
- The need for resilience.
- A more uncertain world means that states need to ensure resilience and avoid overreliance on one partner.
- Many states already seeking to diversify their trade relationships as well as to position themselves to reap benefits of the technological developments.
Ideas and conclusions
- The future of the multilateral trading systems remains uncertain.
- Countries will need to work together to ensure the continued functioning of the system, even if the threats are not yet existential.
- The rate of economic change, driven by technological disruption, means that the existing rules are increasingly obsolete and will require updating, moreover, gaps in the legal framework will need to be addressed.
- In democracies, Governments should adopt policies to ensure continued support for economic openness and interdependence.
- Current tensions arising from structural shifts in global manufacturing are likely to spread to “white collar” industries previously not greatly impacted by globalisation.
- Life long learning policies and other adjustment programmes will be needed to ensure labour mobility as automation, AI and increased trade in cross border services impact the economy and workforce in novel ways.
- Flexibility and resilience will allow for states to navigate current period of uncertainty.
- While short to medium term tensions are likely to persist, the system will survive, if not in its current form as new rules will be required as well as reforms to adjust for shifts in relative economic power - managing this transition flexibly will be essential to maintaining global economic prosperity.
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