States and global trade

Elsa Sc S talks about States and global trade

States and global trade have always remained a global activity and this activity has equally been full of contention throughout the annals of history. Despite all the issues related with this activity global trade has been an essential part of human existence. Trade is acknowledged to be part of state-centric global activity and is controlled and regulated by the state apparatus. It must therefore be kept in view that states think in terms of geography and population which are the relatively stable factors defining their domain while trade-managing markets are defined by exchange and the extent of the forward and backward linkages that derive there-from. The problem is this respect is that that the borders of markets are dynamic, transparent and porous although they rarely coincide exactly with the borders of states. This contradictory aspect of trade keep tensions visible not only overtly but also simmer covertly and create consistent problems.

When trade within a market involves buyers and sellers in different states, the result is international trade and the main problem here is that this activity becomes the object of public scrutiny. It is quite obvious that the kind and level of stakes involved in this activity draws attention to it automatically that soon transforms into partisan attitude gradually assuming policies devised by states. This problem is exacerbated when it is realised that global trade is fundamentally different from domestic economic activity and the international exchange of goods, services or resources with another country ultimately results in many political questions being raised in national interest, especially questions concerning the economic and social security of the nation. Apparently the tenets of economic activity may seem quite akin to general economic principles but in international terms they vary in context and practice.
It is often observed that from one angle exports are desirable because they increase a nation’s monetary reserves and create jobs whereas imports should be avoided because they create dependency, reduce national reserves and threaten domestic business and labour interests but in international trade context, their interpretation is different and is often rated as antagonistic to each other. Though exports create jobs but their full impact on national security depends upon what is exported to whom and on what terms. An export of technology that has critical military or economic applications tends to weaken national security. This is the reason that many states have frequently imposed export controls for both economic and military reasons.

One of the controversial issues besetting global trade is that exports of primary products at unfavourable terms of trade with respect to manufactured goods and technology create fears of economic dependence and although a trade surplus does increase reserves an excessively large bilateral surplus of exports over imports can create political problems, such as those that China is currently experiencing with respect to the US. High export penetration is sometimes seen as an aggressive policy by the target state which may react to defend its perceived security interests. A state therefore has an interest in managing the nature of its exports to other countries and in monitoring its trade relationships with other countries and this aspect is certainly the cause of co conflict in the field of global trade.

Same is the case with imports that have also the tendency of raising complex security issues as imports may reduce or threaten domestic employment, create the potential for external dependency and reduce domestic monetary reserves and all these factors are taken seriously by states as they negatively affect their national capability. Though protectionism is generally considered an impediment to the flow of international trade yet this controlling activity is never ruled out as a vital method to regulate international trading. It is often mentioned that in many instances imports may be vital to domestic military and economic security so that national interest requires secure sources of specific imports but their specificity is not relied upon. This is especially true regarding high technology military hardware which may be assembled in one country but it uses parts and services from a number of other countries because it may happen that the importing policy makers may get suspicious about the respective priorities of the manufacturers and may consider them harmful to their interests.

It is observed that in many cases it may be impossible or impractical to avoid some foreign sourcing therefore the attention shifts from eliminating imports to establishing secure supply chains. It is here that according permission imports from foreign countries becomes a tool of foreign policy of a state as happened in case of pursuing an active policy of capping nuclear proliferation by the nuclear countries in the 1970s and 1980s. Pakistan particularly bore the brunt of this foreign policy restriction imposed by the nuclear powers while it was pursuing its nuclear programme. Such conduct was widely witnessed during the Cold War whereby the United States frequently used access to its domestic market as a bargaining chip in negotiations with other countries. Linking imports with political policies has continued since the Cold War as is amply illustrated by the US and European Union negotiations with China regarding entrance to the World Trade Organization that resulted in giving rise to a long-drawn controversy and gave birth to policy attitudes that still impede impartial and free trade linkages between China and the Western world and has ushered in a trade war.

Global trade also faces the possibilities of trade embargoes that are frequently used as another economic tool of foreign policy and a great deal of international political economy is focused upon the political economy of trade policies. The logic of an embargo is to shut off imports of many vital items and reduce export earning thereby reducing domestic welfare and providing the state with an incentive to change its policies. The design of the postwar international trade institutions was heavily conditioned both by the free trade views and by the interwar experience of beggar-thy-neighbour trade policies that created an environment of destructive competition and retaliation. It is now widely acknowledged that the intent and mission of the WTO and before that the GATT was to progressively reduce the barriers to free trade through multilateral negotiations but this movement towards global free trade, however, did not stop states from using trade tools to further their own foreign policy goals whenever they could.

The current global geo-political environment is in where the political and the economic viewpoints of international trade compete for attention and keep overlapping each other continuously giving rise to impediments of one nature and the other. States have no other option but to keep engaged in global trade but on the other hand they keep very stern eye on the process and are always willing to intervene when it considers that matters are getting out of hand. Observers are aware that the political problem of democracy deficit plays a crucial part in determining the freedom of global trade yet they appreciate that this is part of its evolutionary nature. They often express optimism about the future of global trade and emphasise that it is not only the requirement of market forces but it is also very vital for the states to keep on pursuing it for their own good. TW