International Trade the International System

International Trade

The international system is comprised of many actors. Each of these actors has their own motivations and goals. In the process of seeking these goals, they exert influence on the process of global economic integration. Some of the major actors are regimes, institutions, states and regions. Non-actor influences include transnational issues that influence the different actors in different ways.

A regime is defined as an international organization. Regimes can be loose arrangements between nations or more formal ones, such as the NAFTA or OPEC. Within the context of international trade, there are several other key regimes such as the WTO and the various regional trading blocs. Even trade agreements that are not all-inclusive constitute a weak form of regime. Such trade agreements began as a means to reduce trade barriers and expand trade. Trade regimes have been demonstrated to have improved the flow of trade significantly since their inception. Between 1994 and 2004, trade between the U.S. And Canada (who already had a free trade agreement prior to NAFTA) improved 140%; trade between the U.S. And Mexico tripled (Wayne, 2004). While trade has improved dramatically between member states of trade agreements, the increase in commerce has also spread to non-member states as well. The WTO/GATT, for example, has been found to have "boosted trade among non-member participants as much if not more than among countries of the formal membership roster" (Goldstein, et al., 2003).

The WTO and other trade regimes set the terms of trade. They represent the framework by which the flow of goods is controlled. Since the objective of these regimes has been to reduce barriers, and the result has been improved flow of goods and services, it is reasonable to conclude that overall trade regimes improve global integration. That is not to say there are not moments when they can be used to impede integration. A nation that has a significant amount of power within a regime can use that power of the regime to amplify its own interests. Regimes such as OPEC that control key factor inputs can use their influence to restrict trade by restricting the price and/or availability of those inputs. However, it appears clear on balance that since the modern era of international trade regimes began, the overall effect has been to increase global economic integration.

Institutions include formal international bodies such as the European Union or the International Monetary Fund. These bodies exert considerable influence over global economic integration. Whether or not this influence is positive or negative depends in part on the objectives of the institution. Some, such as the IMF and World Bank actively work towards global economic integration. The latter is active in building intellectual property rights in the developing world, a key antecedent to sustainable economic growth (UN, 2003). Other institutions such as the European Union have enhanced integration within a particular bloc, but have not necessarily contributed outside of that bloc, leaving such matters to its constituent nations. Other bodies, such as the United Nations, contribute research to help improve policy formation, even if they often have these bodies have no legislative capacity of their own.

It is difficult to determine the exact impact of institutions on global economic integration. It is clear that some institutions have a strong positive impact on the amount of integration attained. But many other institutions, in the pursuit of their own interests, have little positive impact or many even have a negative impact on global integration. In future the picture is even muddier. The European Union, for example, represents an archetype of global governance, representing a move beyond the nation-state. Yet the EU in the pursuit of its own interests impedes trade as much as promotes it. Further emergence of such institutions of global governance could in fact have a negative impact on global economic integration in the future.

Nation states are among the most rational economic actors and as such have a mixed impact on global economic integration. While at times this rational economic interest has led to significant leaps towards economic integration, in particular with regards to smaller-scale trade agreements, at times the opposite has been the case. The Doha Round, for example, saw a high degree of intractability on the part of several large actors, most notably the United States. In seven years, the Doha Round collapsed as individual nations protecting their interests could not find compromise or common ground on the issue of safeguards to protect agricultural livelihoods and national food supplies (Capdevila, 2008).

Overall, the role of the nation state is essential to global economic integration. It is the state that must sign trade agreements and only nation-states can push forward trade agendas. Regimes and institutions are, at this point, tools by which states pursue global economic integration. The paradox is that states are also among the greatest impediments to global integration, in part because they are beholden to specific and powerful interests. In the United States we see sentiment shift away from global integration, despite the fact that such integration is in the nation's best interests (Geithner, 2007). However, the structure of nation-states is such that the best economic interest is not always pursued, in favor of political expediency. Global economic integration cannot exist without the nation state, and yet the nation state impedes integration probably more than any other aspect of the international system.

Regions represent an interesting aspect of the international system. Regional interests are often aligned through trade blocs or agreements, yet any given region is comprised of individual nation-states. If there is a move towards post-nation global governance mechanisms, the power and influence of regions may become more pronounced over the course of this century. It is difficult at this point to pin down the influence of regions in global economic integration because of the general lack of formal structure. Yet, it is clear that at the trade negotiation table, nations understand that actions that benefit the region will in turn benefit them. It is this fact that has, at times, enabled rapid integration. Entire nations are brought into the global economic fold at once. The expansion of the EU into Eastern Europe was rapid and many nations were absorbed at once. Once Canada and the U.S. signed their free trade agreement, the process of economic integration in North America was hastened and Mexico was rapidly brought into the agreement, reconstructed as NAFTA. Likewise, the move of Central Asian nations towards the global economy has begun, with all five nations at the table to form a loose regional alliance (Linn, 2007). It is understood that one nation along does not move towards global economic integration - they must all move together.

While there are ample examples of regions moving together towards global economic integration, there are few examples of regions impeding such progress. The key leaders and nations of influence within a region will inevitably move towards integration, and they will bring the remainder of the region's nations along with them. Regions, and the alliances that they form, enable global economic integration.