Editor's Note: Over the next several months, RANE will explore the shifting patterns of global trade, and how these impact — and are impacted by — the changing global order. Through this series, RANE will provide an in depth analysis of these critical trends, offering insights into their geopolitical and economic implications.
"The success of the Portuguese expansion east was spectacular, although it was bought at a high cost in human life on the long voyage around Africa and a high cost in ships. Yet it finished the Arab world as a major actor in world affairs until the discovery of oil there in the twentieth century."
—Peter J. Hugill, "World Trade Since 1431: Geography, Technology, and Capitalism" (1993)
Trade has always played a key role in global geopolitical developments, whether in response to shifting power and technology or in driving such shifts. In his chapter "The Triumph of the Ship," U.S. historian Peter J. Hugill, discusses the role of maritime activity and naval power in the evolution of global trade dynamics. In retelling the rise of Portuguese maritime expansion in the late 15th and early 16th centuries, he encapsulates the broader geopolitical impact that changing trade patterns can have. By adding a new technology, which allowed for the exploitation of an alternate route, the Europeans were able to cut costs via less expensive maritime travel and bypassing the era's middlemen for European-Asian trade in the Middle East. An area previously a critical connector between great regions of the world was suddenly bypassed, and with it the likelihood that a major global West Asian power would emerge. The capacity and cost-effectiveness of ships, as opposed to trains of camels, meanwhile allowed new and expanded trade not only of luxury finished goods, but of bulk commodities and lower-cost goods. Successive European powers — and later, the United States — would dominate these routes and secure the seas, but it was the Portuguese who changed the structure of trade and launched globalization.
Though it is hard to see any true retrenchment of global connectedness today, there are growing voices seeking — and some actions — to claw back some of the more progressive and modern applications of global trade policies and norms. A focus on free trade is being replaced with economic nationalism and tariffs, reshoring, nearshoring and friendshoring have become political directives and corporate responses, supply chain resilience is regaining significance, and the expectations of the past several decades of a common path toward a global trading regime is no longer seen as inexorable or even viable. Although many of these shifts have been long in coming — countries have sought to find counters to U.S. geoeconomic pressure, the United States has been stepping back from the World Trade Organization since at least the Obama administration — there is a sudden recognition that disruption to traditional trade patterns is now the norm, not a passing anomaly.
Since the end of World War II, the United States and Western Europe dominated the global trade architecture built on trans-Atlantic ideals and interests that by the end of the Cold War had taken on an almost inevitable context – that the West "won" the Cold War was a sign that Western trade, economic, political, and social concepts were not only superior, they were the inevitable pathway for all countries. But even before the end of the Cold War, this trans-Atlanticism was being challenged. In 1981, the United States government noted that U.S.-trans-Pacific trade for the first time matched and surpassed U.S.-trans-Atlantic trade, a trend that has only widened in the nearly 45 years since. China's 2001 entry into the WTO further drove shifting global trade patterns, particularly in the second decade of the new millennium. While U.S. manufacturing output remained robust, there was a precipitous decline in employment in the U.S. manufacturing sector in the first decade of the 2000s, shaping longer term political perceptions that China had "stolen" American jobs, though mechanization and increases in overall productivity played a significant role in the shift in labor. Rapid advances in containerized shipping and ship size, low-cost labor and a continued acceptance of the shift to service-based economies in the West ended up placing China at the center of global trade and economic activity. China was not the biggest economy, nor the most advanced. It was not even the source of most innovation. But China's manufacturing and assembly might, with lower comparative cost, meant that most global supply chains had some exposure to China, if not outright dependence.
Ultimately, China did not change its political or social structures to match those of the West, allowing Beijing to assert that economic opportunity and success were not dependent upon an acceptance of all Western ideals, even if it did benefit from the structure and predictability of the Western economic system. Today, Washington sees China as a direct competitor to the United States, as a nation seeking to overturn (or at least rewrite) the global rules and norms in its favor and ultimately to the detriment of the West. China has harnessed its economic strength to bolster its hard power, building out a modern navy and air force, reforming a bloated ground-heavy force structure, and expanding its nuclear force. China has captured critical roles in many global supply chains, starting with key minerals, whether through domestic production and processing or foreign production and domestic processing. U.S. competition in the 21st century is driven as much by trade and economics as it is by traditional strategic hard power.
During the second half of the 20th century, Europe used adjustments to internal trade regulations as the core of what ultimately became the European Union. Through collaborative customs and trade regulations, Europe eased the traditional internal divisions on the Continent, using slow steps toward economic integration to reduce the chances of intra-European military conflict. Post-Cold War, the expansion of the European Union, the launch of the euro and the ultimate size of the European single market gave Europe an ability to shape international dynamics. As Europe adjusted internal regulations, anyone who wanted to trade with its large unified market would need to accede to European standards — and thus Brussels emerged as a driver of the global regulatory environment, allowing Europe to use trade and market access to shape its interests abroad. With this power, and the perception that war on the Continent was less likely, Europe embraced the peace dividend, reducing national military forces — and their attendant military-industrial capacity. Today, we see clearly how these changes shape trans-Atlantic relations, and constrain (at least in the near term) European responses to a shifting global environment.
We are at a turning point in global trade patterns. The perceived post-Cold War inevitability of the world moving to a common set of North Atlantic norms, standards and regulations is no longer likely (if it ever was). Evolving methods of exchange, including electronic payment and digital currencies, are reshaping access and control over trade. Government involvement in the economy — or at least in key critical industries — is no longer taboo, even in the West. The United States is driving a push to decouple, or at least derisk, 50 years of expanded Asian trade. Changing global geopolitical patterns are driving changing trade patterns. Ease or constraint of trade and market access are shaping geopolitical competition or cooperation.
Trade is not going away. After all, as the geographer Sir Halford Mackinder noted, "There is in nature no such thing as equality of opportunity for the nations." In other words, you cannot get everything everywhere, so you either do without, or you trade. But the routes, methods and patterns of trade have frequently changed throughout world history, there are winners and losers, there are new opportunities and closed doors.
Over the next several months, RANE will explore the shifting patterns of global trade, and how these impact — and are impacted by — the changing global order. The series will cover topics ranging from nearshoring trends in North America and the future of the Association of Southeast Asian Nations and the Gulf Cooperation Council, the use of data security regulations as a nontariff barrier, the prospects for de-dollarization in global trade, and the status of the world's main maritime choke points. Through this series, RANE will provide an in depth analysis of these critical trends, offering insights into their geopolitical and economic implications.
