Geopolitics, Trade Blocks, and the Fragmentation of World Commerce
The global economic edifice built after World War II, was a source of unprecedented prosperity, and could not have functioned without open and predictable international trade and the peaceful international relations that are its foundation. The rules that enable trade are outdated and under attack. Social divisions and great power rivalry have eroded the political support for open trade. The consequence is fragmentation of world trade, its separation into blocks that advance domestic producers or most favored nations nearby. These blocs are themselves often pulled by competing agendas. The prospects are for vastly reduced economic efficiency and - most ominously - heightened geopolitical tensions.
The questions about why this is happening, how economic fragmentation will evolve, and how to respond to it, are today uppermost in the minds of policymakers and businesses across the world. These are the questions that Uri Dadush seeks to answer in Geopolitics, Trade Blocks, and the Fragmentation of World Commerce. The world economy is already mired in profound trade uncertainty, which is likely to persist. Since it cannot be dispelled, the uncertainty must be better managed.
Uri Dadush is a research professor at the School of Public Policy, University of Maryland.