Historically. increased international trade activities are often linked to the growth of a country. National power in the world was often the result of creating new markets and trade. For example, the Roman Empire achieved immense growth through the linkages of business rather than the marching of legions and warfare. Many economic successes also occurred when previously closed economies embraced international trade like South Korea in 1960s and China in 1980s.
So far, in this century, more than a billion people around the world have been lifted out of poverty by the power of international trade. International competition has greatly stimulated innovation and productivity.
However, world trade is in flux today. Conflicts have emerged over market instabilities and insecure trade structures which have led to major inequities. No longer are societies certain that an increase in trade resolves current economic and societal shortcomings. Will a better life result from simply doing more of what was done in the past?
Globally some policymakers intend to ride inequities to the hilt. They give preference to the continuity of rules over the adjustment to reality. For them tradition is the overriding decision tool.
But, what happens when the fundament has changed? When a volcano erupts and sends a stream of glowing lava flowing down the mountain, the affected villages are no longer fit for shelter. Today, President Trump reflects the need for new actions in a new era. He is positively willing to disregard the past when its performance distorts the playing field. The consequences have been important.
In 2017, the U.S. started to renegotiate its trade agreements with Canada, Mexico, and with South Korea. It questions the World Trade Organization (WTO) and challenges the whole trade administration system. In addition, a series of import tariffs came into effect. All these steps indicate a better understanding of shortcomings in trade and a quick-footed willingness to precipitate a curative impact. President Reagan already indicated that “all politics are local”. That principle is expanded into a new approach which states “timing matters for change”.
Continuing large trade imbalances and growing foreign investment control are sources of dissatisfaction. Domestic producers fear to be
squeezed by global rivals. New production technology, such as product printing, makes manufacturing history obsolete. Processes also matter. China has taken full advantage of the trade infrastructure built by the U.S. and the EU only to subsequently challenge the status quo. The United States’ share of world exports has declined precipitously from 25 percent in the 1950s to less than 9 percent in 2017. The U.S. share of world imports now accounts for 13 percent of world imports. When compared to its exports, the United States clearly has an excess import consumption.
Reshaping a global system is tough work. Since 1945, the United States has been at the center of the global economy. In its competition with the socialist system market orientation has clearly been won by America. Encouraging now other nations to also help guide the world to better lives does not represent an abdication of leadership. The United States’ willingness to let others participate in the design and implementation of crucial adjustments demonstrates a willingness to permit others to learn, an encouragement of self determination, and a great spirit of security and comfort with change
The debates over international trade might rumble on for years. But we already know that trade policy must become more domestically oriented while domestic policy must become more international in vision. Doing so, must shape the future.
Professor Czinkota (firstname.lastname@example.org) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury. His latest book is ‘In Search for the Soul of International Business’ 2019, Businessexpertpress.com