Trade Integration

This book looks at how Asia has built a deep network of supply chains and is experimenting with new forms of regional trade governance.

The World Trade Report is an annual publication that aims to deepen understanding about trends in trade, trade policy issues and the multilateral trading system.
The 2017 World Trade Report examines how technology and trade affect employment and wages. It analyses the challenges for workers and firms in adjusting to changes in labour markets, and how governments can facilitate such adjustment to increase the positive impact of open trade and technological progress.

This report is the culmination of an 18-month study by Bruegel, Chatham House, the China Center for International Economic Exchanges and the Institute of Global Economics and Finance at The Chinese University of Hong Kong. The project was supported by a senior advisory group, with input from former ministers on both the European and Chinese sides.

The report identifies key trends and areas of potential economic collaboration in the coming decade. It cites the ‘significant opportunities’ and benefits for the two global powers to deepen their economic ties, with scope for an ‘enormous increase’ in investment in both directions. The study, however, also documents the obstacles - including significant differences between political and economic systems - which could frustrate increased collaboration, and argues that building a genuine strategic partnership will require greater effort from both EU and Chinese leaders.

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. This paper suggests 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.