Globalization and trade

The year 1998 marks five decades of the multilateral trading system. For 50 years, the GATT and now the WTO have provided the framework for the conduct of trade relations in a world of growing complexity and interdependence – a world where trade has increased seventeen-fold since the founding of the system and foreign direct investment has grown five-fold in the last decade alone. At the same time, the forces of globalization have brought extraordinary new opportunities. It is true, of course, that the upward trend in world output and trade has not been even or uninterrupted throughout the post-war period. Indeed, there have been times of difficulty and disruption, posing serious challenges for policy makers. The current economic crisis, affecting much of Asia and Russia, and exerting pressure on the economies of many other countries in different regions, constitutes one of the most challenging sets of circumstances to have confronted the world economy in many decades. The financial crisis in South-East Asia, the recession in Japan, slower growth in Asia more generally, as well as in various countries in other regions, and the economic crisis in Russia, have combined to create economic conditions in which the global economy could enter a period of contraction. If judicious policies are brought to bear, however, calming the fears of investors and restoring stability in the financial sector, there is a good chance that while the world economy will suffer slower growth, accompanied by a painful adjustment process in some countries, a deep global depression is avoidable.