Toward a New Understanding of World Trade
Precise evaluations of current and future global trade patterns are more important tan ever.
The first rule of studying international trade is that no single rule, statistic or equation is capable of adequately explaining either current or future trade patterns. Trade is too intricate and too variable, its shape naturally adjusting to conflict, politics, disruptive technologies and so on. This makes reliable data difficult to collect, and the presentation of trade data, like any statistic, can be manipulated to support almost any argument. Anecdotal evidence can complete the picture, or even paint a different one, and thus is just as important as what the numbers say. Ultimately, even the most elegant system of trade-related econometrics must judge itself not on the cleverness of its equations but on whether it describes reality accurately.
Despite the inherent difficulties of this work, the ability to precisely evaluate current and future global trade patterns is more important than ever. Protectionism is back in the news. In truth, protectionism never went away, and lest we think this is only a U.S.-driven process, we need only remind ourselves that Canada and the U.K. intimated last week that they were considering certain protectionist measures unrelated to U.S. moves. The international trade system since 1945 has been deeply marked by a veneer of free trade, but no one would assert that the progression toward freer trade is linear, an inevitable end of economic history.
In recognition of the need to do this important work and to make our analysis more accessible and transparent, GPF is exploring new quantitative ways to analyze trade relationships. We are beginning with a fairly unambitious goal: We want to establish a way to quantify the relative dependency in a bilateral trade relationship over a single commodity. The basis of our approach comes from a 1991 analysis by GPF founder and chairman George Friedman in relation to Japan’s dependence on imports. This approach is by no means sacrosanct, nor do we think it is a perfect representation of trade dependency. We do, however, think it is a useful tool for starting a more holistic conversation about how trade works – a conversation sorely missing from the present media environment.
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