The colour of world trade is changing. And it is changing fast. From colonial era’s mercantilism to Porter’s diamond model, no economist has ever contested the benefits of free trade among equals or among not so equal. And world trade has been shaped around these principles in letter and spirit. The world should salute the minds of the people of US and UK the strongest of the proponents of a free world. When the world had seen enough of destruction in World War II, all the countries of the world, sat in Breton Woods to invent the likes of UN, IMF, IBRD (World bank) and the ITO (subsequently emerged as WTO). Such efforts have been always led by US and UK and their uncontested belief in a freer world, based on economic interdependence and free flow of ideas. Decades have been spent on these principles to give the world a longest period of ‘peace’ in the recent human history, that was dreamed of at Breton Woods in US. Consequently world tolerated the defiance and opposition of these ideas by ‘Russia and others’ till they decided to budge in 1991 and joined these institutions advocating the ideas of a free world led by US and UK. In fact a lot of fuss have been made of the real benefits of these Breton Woods institutions for the world as a whole and to US and UK individually. There is no denying the fact that whole world has embraced these ideas for a fairly long time i.e. more than 65 years. Memberships to these organisations have increased exponentially in these many decades. ITO took its reincarnation into WTO and was established exactly after 47 years of its imagination but has made substantial difference to the way world trade is done in this fairly free world. The world has therefore accepted the contribution of the so called big brothers US and UK of creating this world order. A long time has gone into making and shaping this world order under the umbrella of ideas generated from US and UK. The world has become used to this order and look forward to better times for all. China and India are at the cusp of benefiting from such institutions like never before. In fact India was the biggest beneficiary of the largess offered by IMF when its economy almost dwindled in 1991. India is among very few countries which have shown impressive progress from these ideas of a free world and globalisation. Moreover India has now become almost self sufficient in terms of its food production apart from moving towards a dynamic economic force.,
This world order is surely changing if we notice the two major events of 2016. First is the Brexit and the second is the emergence of DTrumpism in USA. Both events speak volumes of a changing mind and direction of foreign policies of US and UK, after a really long time of work on the present order. Both events indicate emergence of the belief in a new theory that a free trade of the type being practised in this world is skewed in favour of poor countries rather than to rich nations. Even it seems to signify that a free world and free trade of the Breton Woods type ensures poor countries benefit at the cost of rich countries like US and UK. If that is true, the two big brothers need to now focus their attention to having free trade with only equally rich nations. This is the reason while Donald Trump despises Mexico for many of the ills America faces today especially in terms of vanishing US jobs in manufacturing, rather than Canada, both being partners of US in NAFTA agreement. The blue collared manufacturing workers and a similarly thinking majority has helped Donald Trump to enter the While House with a belief that a free trade of the present type has done unprecedented damage to America and its manufacturing set up which must be changed now. Similarly Britain is now unwilling to be part of a larger Europe crowded by poor countries looking for a better life style at the cost of the life style and incomes of its own people.
If indeed the two most important countries are now looking for equals to trade with, then the colour of the world trade is changing drastically. The message is that the international trade theories which assume free trade among all nations need to be redrafted to mention that these benefit only when the free trade is among equally rich countries. Probably the future of world trade has to adjust to these drastic changes in economic thinking and emerging realities around the world trade of today. These changes would also spell new changes into foreign policies and foreign relations of US and UK. The time is running fast disfavouring outsourcing of jobs from US and UK, and free entry of cheaper goods into these countries from the developing world. Need India be too optimistic about the new found Indo-US flavour? It remains to be debated.