Introduction to the Handbook on the EU and International Trade

Abstract

International trade is, by its very nature, multidisciplinary. Trade exchanges are governed by both private commercial law contracts and public international law and determining what can be traded and how exchanges are to take place. The modern global trading system is underpinned by non-discrimination and governed by a set of global rules that spring from the post-World War II Bretton Woods agreements, in particular the General Agreement on Trade and Tariffs (GATT), which, as a centrepiece of 'embedded liberalism' (Ruggie, 1982), set the Western world, and later the rest of the world, on a path of gradual economic and trade liberalisation. Successive rounds of negotiations for greater trade openness led the way to the establishment of the World Trade Organization (WTO) in 1995, with a robust legal system for the resolution of trade dispute amongst states. With the faltering of the Doha Round and alongside the WTO's legal system, states have embarked on the negotiation of ever more comprehensive 'deep' trade agreements, amongst themselves. These international treaties create further rules (and institutional reforms) and legal systems for the management and governance of trade and investment relations amongst member states. The gains from free trade have been unanimously acclaimed, and even the classical economists argued that open trade based on specialisation would engender greater efficiency and generate trade at lower costs (Smith, 1776; Ricardo, 1817). The downside of free trade is that whilst it generates gains, it can also lead to losses for certain groups that lose out to international competition. Due to its redistributive effects, which are much more than static trade creation and diversion in economic terms, trade is a highly political matter. Thus, tensions between advocates of trade openness and of protectionism have raged since the Industrial Revolution and continue to the modern times. From a political perspective, supporting the interests of domestic constituents through protectionism makes sense (Milner, 1999). However, international regimes, especially since the 1980s (the WTO, World Bank Structural Adjustment Programmes) and transitions to capitalism, have brought forth a higher degree of liberalisation in the global economy, and rapid increases in global trade, until the advent of the 2008 financial crisis. Alongside this, a further 'unbundling' of production processes has taken place (Baldwin, 2013). The advent of 'glocal' production that led to global supply and value chains has resulted in products crossing borders multiple times in the production process, blurring the lines of national boundaries. An example is the production of iPhones that takes place across three continents-phones are designed and research into new product development takes place in the United States (US). Component parts are sourced from the USA, Europe and various Asian states. Assembly of the component parts into phones takes place in China.