The New Global Trading Order: The Evolving State and the Future of Trade Review

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The New Global Trading Order: The Evolving State and the Future of Trade ReviewDennis Patterson and Ari Afilalo first clarify the essence of statecraft. Statecraft operates both internally and externally. Internally, the State is responsible for law and welfare. Externally, the State has strategic and trading relationships with the other States that make up the international society of States. Readers will benefit in this regard from first reading "The Shield of Achilles" by Philip Bobbitt to get the most from "The New Global Trading Order." In that book, Bobbitt spends most of his time covering the different mutations of the Modern State that was born in Europe before spreading to the rest of the world.
Patterson and Afilalo correctly posit that the trade order of States follows the constitutional order of States. In other words, if there is a change in the internal constitutional order of the global society of States, that change will have an impact on the prevalent global trading order. It is in the best interest of the victorious States at the end of an epochal conflict to impose their vision on statecraft on the defeated States. However, some States have remained behind the prevailing constitutional and trading orders for a variety of reasons. The authors also point out that statecraft is constantly evolving, putting to rest "the end of history" claim that quickly proved to be a chimera. Furthermore, Patterson and Afilalo remind their audience that for the first time since the birth of the Modern State at the end of the 15th century C.E., a State structure is no longer necessary to constitute a lethal threat to a society. The growth of global networked terrorism and the proliferation of WMDs pose an unprecedented strategic challenge to the State.

To illustrate the preceding paragraph, think about what the world has mainly witnessed since 1945 C.E. After crushing fascism during WWII, the victorious democratic nations succeed to a large extent in imposing their model of statecraft on defeated Germany, Italy, and Japan. The theoretical foundations of the system of trade that was put in place after WWII in the aftermath of the Bretton Woods conference that was held in 1944 C.E. were 1) the respect for sovereignty (strategy), 2) the control on the redistribution of wealth as an inherent part of domestic policy (law and welfare), and 3) the interdiction of trade restrictions for protectionist purposes (law and trade). Comparative advantage replaced the disastrous mercantilism that became the trading benchmark of the 1930s C.E. The institutions that found their genesis at Bretton Woods were 1) IBRD (part of the World Bank), 2) IMF, and 3) GATT (now WTO). That trade system played a significant role in allowing the democratic "West" to subsequently crush communism as a mode of State governance by 1989 C.E. Despite the end of the Western colonialism after WWII, Africa and the Middle East are home to the many States that do not have the resources to build a modern welfare State and have not benefited from the liberalization of trade. Finally, 9/11 and its aftermath resulted 1) in the implosion of the peace dividend that had been hard won by the end of the Cold War and 2) in a renewed focus on both terrorism and WMD proliferation.
Patterson and Afilalo want to explain to their audience which changes in the prevalent global trading order are becoming necessary as a result of the irreversible transformation of the "Nation-State" into "Market State" since 1989 C.E. The key purpose of the "Market State" is to maximize the opportunity of its citizens rather than essentially focusing on the betterment of the welfare of the nation. Today's marketplace is diffuse, globalized, and interloped compared to what it was in 1945 C.E. Here follow a few examples. Market States are experiencing strains in their ability to redistribute wealth and protect their domestic economy due to factors such as ageing demographics, economic deregulation, communications revolution, exponential growth of capital markets, environmental and health threats, and terrorism. The world economy is now divided along industrial or sectoral, rather than national lines. WWII victors no longer dominate the world economy due to the emergence of countries such as the "Asian Tigers," Brazil, India, and China.

Patterson and Afilalo are convinced that the world trade system is now experiencing a malaise similar to the breakdown of the 1930s. Think for example about the current blockage of the Doha round of negotiations. Both authors believe that new trade institutions are needed to handle the vacuum created by 1) the rise of successful entrepreneurs, self-employed people, professionals, etc. who have marketable skills or resources and benefit from a relatively high degree of economic security, and 2) by the failure of the Bretton Woods institutions to help "vulnerable middle classes" and excluded classes in both the developed and developing world. Think for example about the vulnerable classes of the Mexican maquiladoras or the poorly integrated immigrants in many French suburbs.
To overcome that malaise, the authors plead for the creation of a new organization that they call the "Trade Council." In a nutshell, that council would bring together States, regional organizations (e.g., the Bangladeshi Grameen Bank), and industry representatives for addressing global issues that result from the transformation of the global trade order. The "Trade Council" would also aim at putting together programs that create the conditions necessary for the enablement of global economic opportunity as a complement to comparative advantage. The authors' reasoning is that when regulations fail, incentives might win. In that context, Patterson and Afilalo rightly observe that welfare in the States that can afford it is not the cure-all solution to all problems.
The main criticism against the "Trade Council" is that it focuses too much on easing the pains of economic misery in the third world. Countries still poor need very different economic policies from those of countries already wealthy as Erik Reinert correctly observes in "How Rich Countries Got Rich ... And Why Poor Countries Stay Poor."
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