In December 2012, I flew to Samoa to visit the small Pacific island state that had become the WTO’s 155th member earlier in the year. Of course, I had expected the coconut groves, bright colours and white sandy beaches that are everybody’s idea of what a South Sea island paradise should have. But I was less prepared for what I witnessed at the Yazaki EDS plant in Apia, the capital of Samoa. Hundreds of Samoans work at the Yazaki factory, which is the country’s largest industrial employer. Led through the plant by its Japanese manager, I saw thousands of coloured wires being hand-strung into bundles called harnesses, which make up a crucial part of the electronic nervous system of cars and trucks. The wire harnesses are then sent along the Asia-Pacific trade routes to Japan to be inserted into Toyota vehicles that are shipped to all corners of the world. Deep in the southern seas, thousands of kilometres from any major market, was a well-oiled and organized cog in a global production chain. It is an example of the emerging new face of world trade.

Global trade has changed profoundly in the past decade or so. The changes are being driven partly by market opening, but mainly by transport, communications and information technologies. It now costs less to ship a container from Marseille to Shanghai – halfway around the world – than to move it from Marseille to Avignon – 100 kilometres away in southern France. One result of these changes is the continuing globalization of trade, with the volume and value of international commerce continuing to expand, extending trade’s economic influence to all corners of the world. Another consequence is the rapid shift in economic power to the East and South, as developing countries harness globalization to ‘catch up’ with the industrialized West. Finally, we are witnessing the spread of globally integrated production chains, or value chains – in effect, global factories – as companies place various stages of the production process – such as wire harnesses for vehicles – in the most cost-efficient places. This latter development has immense consequences for the way we view and measure trade, which in turn has important implications for international trade policy.