2018 - THE INTERNATIONAL TRADING SYSTEM AT RISK AND THE NEED TO RETURN TO FIRST PRINCIPLES - 174 ESCTER 18 E fin

Faik OZTRAK (Turkey)

The unprecedented growth of the world economy over the last sixty years has been premised on liberal market reform and free trade. Worryingly, in recent years, there has been a backlash against free trade, and this has emerged as a common theme among populist political forces seeking to attribute economic malaise to the free trading order and, by extension, the free movement of people. This report suggests that trade continues to be an agent of growth and development and that the primary sources of problems such as low job growth in manufacturing lie elsewhere. There is also a rising tendency to portray trade deficits as a sign of economic weakness, while surpluses are often seen strictly as a source of strength. But economic reality belies simplistic analysis of this kind. 

This report seeks to debunk these kinds of arguments, while illustrating the more complex macro-economic phenomena that shape relative trade positions. For example, an enduring trade deficit is generally an expression of national dissavings and as such is more linked to macro-economic preferences for running large budget deficits than any trade policy as such. In such cases, protectionist measures will do nothing to solve the underlying imbalance and will likely exacerbate rather than alleviate economic problems.  

The report chronicles the mounting attack on the liberal international trade order including wealth generating regional trade arrangements, and appeals for a return to solid economic principles as a foundation for international economic policy making and future growth. It also recognises that free trading systems do create winners and losers and that governments can play a decisive role in ensuring that labor markets adjust quickly to objective changes in global market conditions. It argues that those societies best able to make these adjustments are, not coincidentally, best positioned to prosper in an integrated global economy and will, simultaneously, generate public support for prosperity-generating open trading policies.