The Hyperglobalization of Trade and its Future

Th is 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 fl ows now go from South to North as well as the reverse; it has witnessed the emergence of a mega-trader (China), the fi rst 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 benefi ciary of the current rules of the game. It will be called upon to shoulder more of the responsibilities of maintaining an open system. Th e third challenge will be to prevent the rise of mega-regionalism from leading to discrimination and becoming a source of trade confl icts. We suggest a way forward—including new areas of cooperation such as taxes—to maintain the open multilateral trading system and ensure that it benefi ts all countries.