Transformations in International Trade
March 6, 1993
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Panelists:
Barry Bluestone
Director of the PhD Program in Public Policy, McCormack Institute, Univeristy of Massachusetts/Boston; Co-Author, The Deindustrialization of America and Negotiating the Future: A Labor Prospective on American Business
Charles Ferguson
Corporate Consultant on high-technology; Co- Author, Computer Wars: How the West Can Win in a Post-IBM World
Shafiqul Islam
Senior Fellow in International Economics and International Finance, Council on Foreign Relations; Former Director of Industrialized Countries Program, New York Federal Reserve Bank
Paul Krugman
1992 Winner, John Bates Clark Medal; Professor of Economics, Massachusetts Institute of Technology; Author, The Age of Diminished Expectations, Currencies and Crises, and Rethinking International Trade
Robert Kuttner
Author, The End of Laisser-Faire: National Purpose and the Global Economy after the Cold War and The Economic Illusion: False Choices Between Prosperity and Social Justice; Founding Co-Editor, The American Prospect
George Mitchell
Assistant Professor of Political Science/Political Economy, Department of Political Science/The Fletcher School of Law and Diplomacy, Tufts Univeristy
Interlocutor:
Kenneth Oye
Director, Center for International Studies, MIT; Author, Economic Discrimination and Political Exchange: World Political Economy in the 1930's and the 1980's; Co-Editor, Eagle in a New World
Moderators:
Maria C. Figueroa and Eric Staal
EPIIC Colloquium
The world economy has at no time in history been as integrated as it is today. With the creation of the Bretton Woods system, the General Agreement on Tariffs and Trade (GATT) came into full force, fostering a period of remarkable, albeit inequitable growth. But the future of GATT has never been so uncertain. Governments are also under increasing pressure to restrain liberalizing trade and to become more protectionist in order to ensure the viability of domestic industries. In the U.S., the woes of the auto industry have been blamed on the competition from Japanese imports. French farmers protested the lifting of their production subsidies, just as Japanese rice farmers demanded continued protection by their government. Still, GATT struggles on, fueled by the ideals of free trade but challenged by strategic trade policies and environmental concerns.
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Countries now compete for economic supremacy and financial rather than military security. The arms race has been replaced by trade wars. Nowhere in modern politics is this more apparent than in the emerging economic engagement between the European Economic Community, an increasingly prominent Asia, and the United States.
The integration of the European Community could create the largest market of goods, services and capital in the world. As the countries of the EC work to create a unified political and economic entity and as reunited Germany could eventually push the frontiers of capitalism into Eastern Europe and the Former Soviet Union, Europe may present the greatest economic oppurtunities, as well as the most challenging risks, in the coming century. But this vision may be aborted by next month's French elections, German fiscal restraint, labor tensions, fears of immigration provoking social unrest and assertions of national sovereignty. All threaten the Maastricht Treaty and the European Monetary Union.
The United States, in order to strengthen its economic base and hone its competitive edge, has entered into the North American Free Trade Agreement (NAFTA) with Canada and Mexico. This has not been unequivocally embraced as manufactoring jobs move southward, alarming U.S. workers. Americans are also concerned with the prospects of immigrants flooding the U.S. job market, and many fear the decline of environmental and safety standards and lowered wages. Mexico, on the other hand, due to the nature of its underdeveloped industrial base and market, stands to gain the most, with a sure increase in job oppurtunities, and a potential increase of 16.2 percent in output.
Across the Pacific, the economies of Japan and the Newly Industrialized Countries of Asia -- the Four Dragons of Hong Kong, South Korea, Taiwan and Singapore -- have become the third pillar of the new global economy. Constituting less than one percent of the world's land mass and less than four percent of the world's population, they control 65 percent of the world's wealth. Some have raised the possibility of a Japan-centered Asian trading bloc, which if not driven by the efficiency of intra-regional trade, may be at least spurred by the fear of exclusion from the potentially insular markets of the EEC and NAFTA.
Yet in this regional bloc there is unease as well. In Asia, historical resentments of wartime atrocities and occupation may prove a strong deterrent to a Japanese led sphere of economic hegemony. Japan and the NICs maintain stronger economic ties with the United States than with each other. Social unrest in the NICs questions whether development without political freedom is sufficient. Japan's seeming economic invulnerability has been shaken by the collapse of a speculative economy and financial scandals of corruption and political intrigue.
The periphery is equally dynamic. Communist China, with more than a fourth of the world's population, is a virtual "sleeping giant" in the economic realm. Beijing's experiments with stock markets, foreign investment, privitization and a burgeoning weapons-export industry have given China the means to grow at a rate faster than any other nation in the past decade with no signs of slowing down. The year 1997 could bring added prosperity if Hong Kong is successfully reunified with the mainland.
After years of nationalistic trade protection, Latin America is finding that regional trade agreements can provide an enormous spur to its economies through a mixture of bilateral and multilateral trade compacts. Trade has increased 250 percent since 1986.
Such war-torn countries as Vietnam and Angola are struggling to recover. And the former client-states of the Cold War such as Cuba, El Salvador, Afghanistan and the Soviet bloc countries of Eastern Europe are confronting grim choices. The former Soviet Union, facing the problems of conversation from a military-command economy to a consumer economy, is relying on a price-based method of "shock therapy", with less than optimal groups. Nevertheless, with over one third of the world's Ph.Ds, and some of its richest natural resources, Russia and perhaps the Ukraine have enormous potential for development.
Will regionalization and trading blocs be the new venue for trade? Or are these the first steps towards globalization?