The trouble with trade (page 1 of 3)

The next decade will see a significant strengthening of two seemingly mutually exclusive trends in global trade.

Trade will become, simultaneously, more global and more local. And the Arab world, pulled in those opposite directions, will open up its markets in a swathe of trade deals - multilateral, regional and bilateral.

Integrating the 300 million-plus people from the Arab world into the global economy will hurt regional economies much more than it will benefit them. Developed economies will use all the tricks of the trade to get the best possible deals for their own businesses, through multilateral and regional deals. The Middle East will get the short end of the stick.

In the multilateral arena, the World Trade Organization (WTO), which acts as a referee for global trade, will become more and more powerful, encompassing new sectors and getting new powers to police offenders. With over 140 current members, the WTO will within a decade rival the UN as the world's largest - and most powerful - international organization.

With increased power for the WTO, global trade, which has increased three times as fast as the world's merchandise output in the last 50 years, will continue to outpace other sectors of the economy. Even in 2001, while world farm output increased by less than three percent, trade in farm products increased by 12 percent.

Similar trends are becoming increasingly visible in other sectors, too, notably services and manufacturing.

While the WTO will bring in a wave of trade globalization, at the same time, the world will also be divided into regional blocs that are set to increase in power. This will happen since the big countries, especially in the developed world, will not be willing to make the sacrifices necessary to really empower the WTO in areas that are of strategic interest to them. While seeking access to developing markets, the West will continue to repel any attempts to open their own markets in any meaningful way.

This will lead to a new divide, and more disastrous WTO ministerial conferences, like Seattle in 1999. Repeated failures in breaking new ground and providing equitable trading terms will lead the big blocs, notably the European Union (EU) and the United States, to sign up regional and bilateral deals with other countries, especially with big markets in Asia and Africa.

The European Union recently signed agreements with a wide variety of countries - including Morocco, Sri Lanka and Lebanon - at terms that are tough for the small countries. In the future, with 30 member countries and nearly 500 million people, this will be one of the largest such groupings and will increase its negotiating power much more. The EU is currently negotiating a EuroMed treaty with all the Mediterranean countries.

The United States is also busy building up its trade muscles. It already dominates the North America Free Trade Area (NAFTA) and is now negotiating the Free Trade Area of Americas, which will encompass all the countries of the North and South American continents, and which will be the most influential and single largest such group, accounting for over a third of the world's total economic output.

The EU trade commissioner, Pascal Lamy, admits that such a threat exists, but blames it on the "lack of flexibility" among the developing countries and also on politicians seeking voters' approval at home.