Making Regionalism Safe
Article Summary and Author Biography
Bringing the newly market-oriented countries of Asia, Latin America and Eastern Europe into the global economy would harness the productive capacity of some three billion people. But increased resistance to free trade has cut the supply of political tolerance for another global trade round anytime soon. An expansion of regional trading areas such as the European Union and NAFTA promises the greatest progress, but international e»orts must keep regional blocs from becoming protectionist and ensure they are compatible with the global trade regime.
Robert D. Hormats is Vice Chairman of Goldman Sachs International.
COPING WITH NEW COMPETITORS
The answers to two great questions will soon set the direction of the world economy. One: Will the industrialized democracies cooperate to sustain an open, market-oriented world trade and financial order? To do so, they must rise above the different ways they practice capitalism and mounting domestic pressures for economic nationalism. Two: Can these countries integrate into such an order those countries that are turning from state controls toward market capitalism?
The second challenge, on which this article focuses, requires vision, will and a comprehensive strategy. Established powers normally have difficulty coping with new competitors: France with Britain in the early nineteenth century, Britain with America later, and most recently the United States with Japan. Now, as a group, the industrialized democracies must integrate into the world economy not one but many developing countries, some with enormous economic potential. This process is producing acute concerns among established powers. Will jobs be lost, wages lowered, investment capital diverted? Can workplace and environmental standards be maintained, much less improved?
Despite the frictions of getting from here to there, expanding the participation of these nations in the world economy will greatly enhance the economic growth of developed democracies. Such was the case for the United States in the decades after World War II when farsighted assistance helped revive and reintegrate Japan and West Germany into the world economy. In the next few decades, phasing into a global economic order the newly market-oriented countries of Asia, Latin America and formerly communist Europe would harness the enormous productive capacity and market potential of some three billion people. The result would be an unprecedented transformation and growth of the global economy and a powerful antidote to divisiveness and instability.
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