with secure local resources, trade surplus, and the accumulation of precious
metals, particularly gold and silver in
the form of bullion. Consequently, they
regarded international trade as a zero-sum game.
Against this historical backdrop,
the free trade system held together by
multiple sovereign nation-states, as we
know it today, is a 20th-century creation.
The Great Depression in the 1930s led
to protectionist moves by major industrial nations. But thereafter, the General Agreement on Tariffs and Trade
(GAT T) since 1948 and the World Trade
Organization (WTO), which superseded GATT in 1995, facilitated significant
reductions in quotas and tariffs. Consequently, international trade in merchandise surged to 17 trillion USD in
2017. Moreover, much of this volume
is accounted for by trade in intermediate goods. This is a manifestation of
the rise of global supply chains in a variety of assembly-based manufacturing
A SPECTER IS HAUNTING the globe—a specter of neo- nationalism and protec- tionism. But not all the global powers are united
in an alliance to exorcise this specter,
because its lead conjuror is the U.S.—
the largest economy in the world. U.S.
protectionism was presaged by an ironic juxtaposition at the World Economic
Forum in January 2017, when China’s
President Xi Jinping championed the
cause of a liberal economic order in
contrast to President Trump’s America
First stance. Why has the world moved
toward protectionism, and what is its
impact on businesses and consumers?
And how damaging is this phenomenon to our prosperity? This column
considers what free trade has meant,
and the impact of its demise.
This topic is particularly important
to people involved in computing in an
increasingly digital world. The history
of free trade centers around non-dig-
ital goods and services, given the rela-
tively late arrival of digital and digitally
traded goods and services. That history
helps explain the issue and draw impli-
cations for the digital world.
History of International Trade
Trading has a very long history underpinning ancient civilizations that
thrived in Egypt, Greece, and Rome. Later, merchants in Venice and elsewhere
traded by sea, but also along the Silk
Road connecting China to the Middle
East and the West. It was not until the
18th century, however, that the economists Adam Smith and David Ricardo
articulated the modern notion of freedom of commerce and freedom of the
seas. By then, the Dutch and the British, among other sea powers, cultivated
colonies, and fueled a fierce debate between mercantilists and free traders, a
debate that lasted well into the late 19th
century. Mercantilists believed strong
nation-states had to be self-sufficient
Free Trade in
a Digital World
Considering the possible implications for free trade, traditionally based on
non-digital goods, for a modern global economy that is increasingly based on
intangible products and services enabled by digital technologies.