Globalisation has enabled individuals, corporations, and nation-states to influence actions and events around the world faster, deeper and cheaper than ever before, and also to derive benefits from them. Trade opening and the disappearance of many barriers between countries have the potential for expanding freedom, empowerment, democracy, innovation, and social and cultural exchange, while offering outstanding opportunities for dialogue and understanding. This is the good side of globalisation.

But globalisation has also contributed to an increasing number of worrisome phenomena – the scarcity of energy resources, the deterioration of the environment, the migratory movements provoked by insecurity, poverty, and political instability, and even the volatility of financial markets, as we have seen in recent weeks.

It can be argued that in some instances globalisation has reinforced the strong economies and weakened those that were already shaky. As public opinion has become considerably more anxious about the effects of globalisation, there has been growing concern over the impact of increased competition  on socio-economic fabrics, the outsourcing labour-intensive services, and global trade imbalances.

Trade restrictions
However, increasing trade restrictions is certainly not the right response to anxieties generated by the rapid pace of globalisation and would cause unthinkable damage. More often than not, the real cause of pain is not trade opening but the failure to accompany the efficiency gains it brings with economic policies that would amplify its benefits.

Memory of the great recession of the 30’s, which started with trade protectionism and finally led to World War II, now seems blurred in some people’s minds. The establishment of the Bretton Woods system, including the General Agreement on Tariffs and Trade (GATT, now the World Trade Organisation-WTO) was an attempt to create an open and rules-based global economic system that would prevent the tragedy from happening again. To avoid repeating the mistakes of the past we should recognise that the politics of trade opening involve a built-in asymmetry: while the millions who experience gains in purchasing power from trade opening are usually unaware of the cause, the thousands whom it hurts can easily identify the source of their pain.

The central issue is how to ensure that trade benefits all. This must occur at two levels: both within nations, and among them.

Fundamental elements
Regarding the latter level, two elements are fundamental: fairer multilateral trade rules, and the building of trade capacity in developing countries. A primary objective of the on-going WTO negotiations under the Doha Round is precisely to address the remaining imbalances in WTO rules that work against developing countries, whether in agriculture or in areas such as textiles or footwear.

Over the coming months WTO members will have the opportunity to demonstrate that they want to fulfil the promises they made in Doha in 2001 to open their markets more and address the most egregious trade distortions.

At the intra-national level,  trade opening can and does translate into greater growth and poverty alleviation, but this is neither automatic nor immediate. Rather it must be accompanied by a solid domestic agenda to spur on growth and cushion adjustment costs. Appropriate tax policies, competition policy, investment in quality education, social safety nets, and innovation to foster healthy environments must all be part of the mix needed for trade to translate into real benefits for the people.

The multilateral arena continues to be the most cost-effective way to negotiate trade matters. Market access resulting from WTO negotiations is global and cannot be matched by any bilateral trade agreements. Because of its inherent advantages, the multilateral trading system can be complemented but not replaced by free-trade agreements.  

-IPS (The writer is Director-General of the World Trade Organisation.)