The Hyperglobalization of Trade and its Future

66 Pages Posted: 25 Jul 2013

See all articles by Arvind Subramanian

Arvind Subramanian

International Monetary Fund (IMF); Center for Global Development

Martin Kessler

Peter G. Peterson Institute for International Economics

Date Written: July 24, 2013

Abstract

This paper describes seven salient features of trade integration in the 21st century: trade integration has been more rapid than ever (hyperglobalization); it is dematerialized, with the growing importance of services trade; it is democratic, because openness has been embraced widely; it is criss-crossing because similar goods and investment flows now go from South to North as well as the reverse; it has witnessed the emergence of a mega-trader (China), the first since Imperial Britain; it has involved the proliferation of regional and preferential trade agreements and is on the cusp of mega-regionalism as the world's largest traders pursue such agreements with each other; and it is impeded by the continued existence of high barriers to trade in services. Going forward, the trading system will have to tackle three fundamental challenges: in developed countries, the domestic support for globalization needs to be sustained in the face of economic weakness and the reduced ability to maintain social insurance mechanisms. Second, China has become the world's largest trader and a major beneficiary of the current rules of the game. It will be called upon to shoulder more of the responsibilities of maintaining an open system. The third challenge will be to prevent the rise of mega-regionalism from leading to discrimination and becoming a source of trade conflicts. We suggest a way forward -- including new areas of cooperation such as taxes -- to maintain the open multilateral trading system and ensure that it benefits all countries.

Keywords: Globalization, Convergence, Inequalities, Multilateral Trading System, China

JEL Classification: F42, F15, F60, F68

Suggested Citation

Subramanian, Arvind and Kessler, Martin, The Hyperglobalization of Trade and its Future (July 24, 2013). Peterson Institute for International Economics Working Paper No. 13-6, Available at SSRN: https://ssrn.com/abstract=2297994 or http://dx.doi.org/10.2139/ssrn.2297994

Arvind Subramanian (Contact Author)

International Monetary Fund (IMF) ( email )

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Center for Global Development

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Martin Kessler

Peter G. Peterson Institute for International Economics ( email )

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Washington, DC 20036
United States

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