Trade is as old as humanity. Initially based on barter, markets emerged to facilitate the exchange of goods and services. Trade became international, then global, and the globalization process continues today.

Sometimes, however, markets don't work effectively, or they just fail – the 2008–2009 financial crisis being a perfect example of the interaction of market and policy failures – and a regulator needs to step in to provide a solution. Ideally, this enables the market to rebound, without distorting it in the process, and provides the framework to address problems. Failing to do so could lead to fundamental discontinuities or tipping points. Markets also don't deal well with ‘externalities’ such as climate change and sustainability, issues increasingly driven by trade globalization and the rise of the BRICs (Brazil, Russia, India and China) and other high-growth emerging markets.

Trade and energy: an enduring dilemma

Globalization proponents argue that trade has created wealth and enabled millions of people to escape poverty. From 1990 to 2005 alone, the number of people living on less than US$1.25/day fell from 1.8 billion to 1.4 billion, an unparalleled achievement – although the World Bank expects the 2008–2009 crisis to trap tens of millions more in poverty. Overall, human development improved as economies grew and living standards rose.

Opponents argue that world trade and the endless corporate search for natural resources, markets and profits, has impaired the Earth's ability to support its inhabitants (current and future).

Trade and high living standards

The quality of Japanese people's lives would be significantly lower without international trade. Poorly endowed with natural resources, Japan depends on foreign countries for the supply of natural resources and the products using natural resources such as food. In terms of calorie intake, Japan's dependence on foreign supply for its food consumption is higher than 60 per cent. Japan's dependence on foreign supply for oil, which is essential for leading a modern life as it is a main source of heating and air-conditioning as well as a major input for the production of vital goods such as drugs and foods, is as high as 99 per cent.

These statistics indicate the crucial importance of international trade for Japanese people to enjoy their high standard of living. Imagine the deterioration in the quality of life of the Japanese if foreign supply of vital imports were cut. The prices of food, oil and oil-related products would soar, and the budget of Japanese citizens for the purchase of other products would be significantly reduced, thereby lowering their living standard. It should be emphasized that the limitation of import opportunities would particularly hurt the poor, as their share of income for purchasing essential products is high. This point is especially relevant during a period of recession and when a widening income gap between rich and poor becomes an important social problem.

One billion people in the world were chronically hungry and malnourished in late 2009, more than at any time in history. This flies in the face of the target of the Millennium Development Goal (MDG) to reduce by half the proportion of people who suffer from hunger by 2015.

Fortunately the world leaders recognize the problem and are giving the issue the priority that it deserves. At all the recent major international conferences, the leaders have been making pledges to take practical steps to meet the challenge. At the July 2009 G-8 summit in L'Aquila, Italy, for instance, they agreed to formulate a comprehensive strategy for sustainable agricultural development and decided to mobilize US$20 billion over a three-year period. This is a significant step, even though the amount committed falls far short of the Food and Agriculture Organization (FAO)'s estimates of US$30 billion required per year for investments in rural infrastructure and other needs such as providing access to modern inputs for food production, guaranteeing food safety and quality and food safety nets.

Any strategy to reach these goals must start where the prevalence of hunger and poverty is the highest; in rural areas in general and agriculture in particular. The ultimate goals of these strategies must be to raise agricultural productivity and output so that agriculture incomes will become comparable to those attained in other sectors.

Stronger and more sustainable economic growth is more critical than ever in today's environment. In the wake of the economic crisis many developed and developing countries have shifted their focus to domestic challenges, including unemployment. At the same time, global challenges such as environment, health and poverty have become more urgent. Entrepreneurship and innovation provide a way forward for addressing these challenges on the local and international levels.

Entrepreneurship is increasingly recognized as an important driver of economic growth, productivity, innovation and employment, and it is widely accepted as a key aspect of economic dynamism. Entrepreneurs fuel innovation in developing new or improving existing products, services or processes. As first described by Schumpeter, new technologies and their applications stimulate the growth of new firms, and improve the efficiency and productivity of existing ones.

Tariff and non-tariff trade barriers can hinder entrepreneurship by limiting opportunities for internationalization, which is important to the competitiveness of enterprises of all sizes – large firms expanding across borders, SMEs integrating into global supply chains and entrepreneurial ventures seeking high growth. Innovative firms need access to international markets not only for revenue growth but also for the development of knowledge, skills and networks necessary for long-term growth and competitiveness.

The role of entrepreneurship education

The development of entrepreneurial skills is a core component for building socially inclusive and highly participatory economies.

The world lacks systematic global economic policy coordination from its existing institutions. More specifically, the governance of global trade and the stability of the international trade regime have clearly been affected by the fallout from the wider economic turmoil of 2008–2009. The multilateral trade system is threatened by the perception that globalization has been tarnished by speculative investment and other excesses in financial markets seeking larger profits at the expense of sound business practice. Growing public anger about bad practice in the financial sector since 2007 spilled over into a growing demand for protectionism. This connection might be irrational, but it is all too easily made. Indeed, it is part of a disturbing trend towards rising economic nationalism. Unfairly, the WTO often carries the criticism for excesses in other sections of the global economy, especially the financial sector.

Not only is the future collective management of the global economy crucial to the environment in which trade governance exists, but the architecture of the trade regime will need to accommodate the new stresses placed upon it by questions of sustainability and economic development emanating from the financial crises and the protective sentiments and practices that have ensued. The WTO cannot nor should it try to address all these issues. However, it is apparent that in an increasingly interdependent world, trade policy makers can ignore neither the context in which they operate nor the need to contribute to the resolution of other challenges.

Without international commerce living standards would be fettered by national resources, prejudices and spending. Perhaps more importantly, international commerce also provides new vistas to explore, creating opportunities unavailable in traditional, hidebound societies. It is no wonder that such freedom is feared by insecure rulers and elites, those unwilling or unable to compete, and those yearning for yesteryear. Until the recent sharp global economic downturn, the latter had been on the defensive for nearly twenty-five years as countries of all types integrated further into the world economy, so creating greater freedoms for their citizens and firms. Will the current crisis provide the pretext for limiting that freedom and what are the implications for the WTO?

The enemies of opportunity know that outright protectionism of the 1930s type is politically unviable. Smoot and Hawley are names that have gone in infamy; nobody wants to be their heir. So new tactics are employed and what better than to subvert the implementation of legitimate state functions to protectionist ends. In the first instance criticism can be deflected by pointing to the legitimate purpose of the measure in question, with the hope that the analyst, journalist, or voter in question is too bored or too lazy to ask whether any noble policy objective could be accomplished at less cost to international commerce. Murky protectionism has increasingly replaced outright protectionism as the reactionary's international economic policy of choice.

Trade in India was important well before the Colonial period. India's external trade made a significant contribution to the world economy. An extensive internal trade network also evolved from the large size of the country.

Any analysis of India's trade must keep in perspective the large volume of trade that happens within it. India's engagement with the rest of the world is limited because of the large domestic market, which is complex owing to the typicality of the interplay between constituent states and regions.

By the year ad 1000, the estimated share of India in the world economy was over 30%, the largest in the world. This share reduced to about 25% by the year 1500.

During the Colonial period, by the end of the eighteenth century, the Indian economy witnessed large-scale exploitation of domestic resources. It became a captive supplier of raw materials. Investments in the economy fell sharply thus severely dampening growth.

The link between trade and security remains, for many, a controversial or at least an ambiguous issue. One school of thought argues that trade promotes security through increased welfare; the other views free trade as a potential trigger of insecurity and conflict. Neither school has a monopoly over truth.

What have trade and security got in common? Not much, at first glance. Trade is for business and security is the concern of the state which is responsible for protecting its citizens. So much for the conventional, narrow-minded view. It does not require a Nobel laureate or a rocket scientist to unveil the inherent two-way relationship between trade and security. Let's examine this relationship using sheer common sense, and staying away from fancy theories and frameworks.

The essence of security lies not so much in how many police forces, guns and hi-tech intelligence gadgets are around to sniff out potential terrorists and mete out harsh punishments to deter them from carrying out their evil acts. This militaristic approach might provide a sense of security for some but – for many, including myself – it bestows a frightening image of a fragile peace, a tense environment and an artificial truce between the state and its presumed adversaries.

Sure enough, these measures have so far provided a robust deterrent and foiled many potentially deadly schemes (but not without notable exceptions, as demonstrated by recent bombings in India and Indonesia, military conflict in the oil-producing Nigeria Delta, piracy off the Somali coast, not to mention Iraq, among many others).

Nearly all the member countries of the WTO have signed the 1948 Universal Declaration on Human Rights. To the extent that trade boosts or hinders these rights, WTO members have a collective responsibility to ensure that world trade rules are consistent with human rights obligations. Yet the phrase ‘human rights’ continues to raise eyebrows at the WTO, as if the fulfilment of political, economic, social and cultural rights were foreign to, or inherently contradictory with, the pursuit of increased world trade flows and a rules-based trading system.

The reticence of many governments to take into account human rights in trade negotiations is probably linked with the long-­standing use of unilateral trade sanctions to pursue a variety of public ­policy goals including international security or the respect for human rights. Indeed, trade sanctions have been used for centuries: in 432 bc Pericles enacted a decree banning trade with Megara in order to protest against the kidnapping of Aspasian women. Since World War I, there have been more than 170 cases of economic sanctions including trade, investment, or travel restrictions. Most of them have been applied unilaterally. Most recently, a number of developed countries have decided to withdraw trade preferences or offer increased market access based on the respect of human rights by exporting countries. Even with the best of intentions, these initiatives have convinced many developing country governments that rich country governments want to use human rights as a tool to threaten their sovereignty or to shut them out of their markets.

In November 2006, 200 German policemen and prosecutors raided 30 offices and homes of Siemens managers to investigate allegations of embezzlement at Siemens' fixed-line phone unit. Six suspects were arrested, among them current and former high-ranking managers. In 2007 a German court fined Siemens €201 million in relation to illegal payments of €12 million made by its information and communication business unit to government officials in Nigeria, Russia and Libya. At the same time prosecutors in at least ten countries, including the USA, were investigating allegations that Europe's largest engineering company by sales had bribed officials to win big infrastructure contracts around the globe.

Also in 2007, in the wake of internal investigations started at the end of 2006, Siemens finally admitted to having identified dubious payments amounting to €1.3 billion from the years 1999 to 2006. As a result, the ‘trains-to-light bulbs’ conglomerate replaced all but one of its managing board members.

On 15 December Siemens pleaded guilty to charges of bribery and corruption and agreed to pay US$350 million in disgorgement to the SEC. In related actions, Siemens paid a US$450 million criminal fine to the US Department of Justice and a fine of €395 million to the Office of the Prosecutor General in Munich, Germany, on top of the earlier €201 million.

What is responsible sourcing?

Responsible sourcing, also referred to as supply chain responsibility, is a voluntary commitment by companies to take into account social and environmental considerations when managing their relationships with suppliers.

This strategy is now an integral part of effective supply chain management. Responsible sourcing practices contribute to efficiency and continuity of the supply chain in the long run.

As production chains expand, companies of all sizes and sectors are devoting more efforts to managing supply chain risks and building effective supplier relationships. Improving social and environmental performance in production chains is becoming a major element of this process.

As experience has shown, one bad incident with one supplier can lead to a disproportionate amount of adverse publicity, damaging a company's reputation and brand image. This has led a growing number of companies to develop and promote responsible sourcing practices.

Indeed, effective supply chain management is a way for businesses to build a competitive advantage, especially in sectors where production is largely outsourced, such as clothing, footwear, electronics, or food products.

For many companies, working towards improving social and environmental standards in the supply chain has become a natural extension of their commitment to corporate responsibility and, as such, forms part of their overall business model.

As the world enters the second decade of the twenty-first century and approaches the hundredth anniversary of the founding of the ICC, in 2019, there are good reasons why one should feel optimistic. In citing just a few, one would highlight the tremendous impact that information and communication technologies have had on society. The mobile phone has become ubiquitous in all parts of the world and has succeeded in reaching millions of people at the bottom of the pyramid, thereby improving productivity, connectivity and opportunities. Without by any means seeking to minimize the considerable geopolitical threats, comparatively speaking the world is at peace; there are fewer wars currently than at any time since the end of World War II. In particular, there can be hope that the imploding states that seemed endemic to Africa in the 1990s and early 2000s have stabilized and that the continent could be on the verge of sustained growth. China's trade and investments in Africa have contributed considerably to its greater integration in the global economy. Throughout the global South there is the emergence of a new ‘middle class’, which The Economist has estimated at some 1.2 billion people. And without doubt one very important reason for optimism is that the world economy seems to have withstood the greatest shock it has experienced since 1929. The global economic system, therefore, would appear to be resilient.

Thirty years ago, China was virtually absent from international trade. Thirty years later, a rare yet broad consensus around the world, one shared by both Americans and Chinese, is that ‘China depends too much on exports’. Indeed, exports are now almost 70% over the GDP (not of the GDP, please note)! And during this thirty-year period, China has enjoyed an average annual growth rate of about 9.6%.

China does have a problem of ‘too much trade, too little consumption’. Household consumption only accounts for about 35% of GDP, versus 51% of GDP held as national savings in 2007. There are various factors, including certain institutional deficiencies, which have kept household disposable income low as a proportion of national income. These factors have resulted in a relatively narrow domestic consumer goods market. But even were we to assume China's domestic consumer market to be normal (in terms of the common standard of East Asian economies at similar stages of development), say up to 60 per cent of GDP consumed by the household and government sectors (a proxy to the situation in China during much of the 1980s and 1990s), Chinese purchasing power for consumption would still be very small given the fact that China's per capita income is today still less than US$3,000. And companies, either local or multinational, would still try to export as much as possible because external markets, especially markets in developed countries, are far bigger with considerably more purchasing power.

Starting with David Ricardo, economists have examined how national differences in technological capabilities give rise to specialization and trade. Since then a large strand of the economic literature has been concerned with the intricacies of the relationship between trade and technology. Three types of interaction can be envisaged:

• In learning-by-doing, trade increases the size of markets and the scale of specialization with positive spillovers on the domestic production of knowledge and accumulation of experience. Specialization may switch from sectors with low technological spillovers (e.g. primary goods) to sectors with important learning-by-doing effects (e.g. low-tech manufacturing goods).

• In learning-by-importing, foreign technology gets used or imitated. Trade transfers foreign technologies to the domestic economy or lets domestic firms improve their own technologies or products through reverse engineering and imitation.

• In learning-by-exporting, exporting firms learn by observing their competitors on international markets and aim to reach the same efficiency as their competitors by adopting their technologies.

Trade as a channel of technology diffusion

Together with foreign direct investment (FDI) and the diaspora, trade counts as one of the most important mechanisms for transferring technologies and diffusing innovation. In fact, trade and innovation are mutually reinforcing. Innovation gives birth to technological advantage which, together with differences in factor endowments, is the source of comparative advantage which in turn drives trade. Trade and investment affect innovation through technology transfer, competition effects, economies of scale and spillovers. Intellectual property protection matters too in stimulating technology diffusion.

The year 2009 and early 2010 offer a fascinating paradox. Following the autumn 2008 financial collapse, the world trade regime has displayed remarkable resilience to the severe world economic crisis with so far little evidence of a rise in protection, contrary to prevalent claims. Meanwhile, the obstacles to conclude the Doha Round remain intact. Such a contrast between the resilience of the trade regime and the inertia at the WTO suggests an ongoing systemic shift in the future role of the WTO.

Domestic politics and the WTO Rounds

An initial explanation to the Doha Round inertia – that there are many more WTO members – is not convincing. The Doha negotiations are still largely limited to a few countries, a dozen if the EU is counted as a single entity.

As so often in international trade, more convincing reasons can be found in domestic factors. An increasing number of WTO members are democracies. Many constitutions impede deep trade liberalization. In the United States, for example, the constitution gives a lot of weight to agricultural lobbies in the Senate, and the president has only eight years (with three intervening electoral campaigns) to launch and conclude multilateral trade negotiations.

Moreover, since the late 1980s, all the industrial democracies have experienced increasingly thin governing majorities (regardless of which party ends up governing). Thin majorities offer small and strong vested interests a power out of proportion with their real importance, suffocating the wide support for freer trade among ­consumers and business.

Any article which attempts to suggest that trade is destructive is going to be controversial. It will attract the attention of the pro-­globalization and trade lobby whose attacks on the underlying arguments will be swift and stacked with conventional arguments. The reality though is that both directly and indirectly free trade encourages the unrestrained consumption of goods and services, thereby playing a potentially negative role in the world by increasing the pressure on resources in a constrained planet.

Conventional wisdom holds that trade over the centuries has been the great integrator of societies and has been the catalyst for human advancement and global prosperity creation. This is even if one discounts the fact that in the pursuit of trade colonial powers sowed the seeds for many current day inequalities in numerous parts of what is now the developing world.

The common response to any suggestion that this issue needs to be considered seriously is to dismiss it as naive and unrealistic. The often-used retort is: ‘If there is less free and open trade, then what?’ But is that the question we should be asking ourselves in the twenty-first century, knowing what we now know with the benefit of modern science about resource constraints?

No one is denying that trade in its numerous forms and shapes is needed, that it is very much part of what drives the human desire to be resourceful, that it creates much needed economic activity and thus is even essential for human development.

Two lessons, among others, stand out from the experience of the 2008–2009 financial crisis. The crisis has shown that greed can lead to ruin, not only of persons but also of institutions. It has also shown that an uncritical faith in what is perceived as ‘brightness’ is no prescription for achieving the best results.

On the issue of greed, it is important to recall Max Weber (1864–1920), the noted German sociologist, who wrote The Protestant Ethic and the Spirit of Capitalism. In this celebrated book, Weber does not equate ‘the spirit of (modern) capitalism’ with the reign of unscrupulousness in the pursuit of material interests. He sees this ‘spirit’ instead in the ethos of industry, frugality, punctuality, and honest dealings in the pursuit of increasing one's capital. Weber traces this attitude of making money to the idea of a ‘calling’, an idea that defines a life-task in a given field of activity. Such an idea was, he argues, present predominantly in the Western world among the Protestant people. For the saints, so ran the belief in ascetic Protestantism, the everlasting rest belonged not to this world but to the next. On Earth, man must do the work of God who sent him here. In his own lifetime, Weber saw how the idea of duty in one's calling had been reduced to the ghost of dead religious beliefs. The pursuit of wealth, stripped of its religious and ethical meaning, had become an indulgence in ‘mundane passions’.

There are important lessons to be learned from the 2008–2009 global financial crisis – but there are equally important lessons to be taught. The public quickly blamed greedy business leaders, particularly those in the financial sector, as well as globalization for the financial crisis, but perhaps the blame lies elsewhere – first with our education system, and second with the political dogma that nourishes many students.

Some suggest that business and legal education, particularly in the United States, creates robber barons devoid of morality and ethics. Too often they point their finger at the present models of professional education, not realizing that business and law schools almost always integrate values and ethics into their curricula. While there is a need to strengthen business and legal training to assure that students have a better understanding of right and wrong, there are other serious problems waiting to be addressed – and almost certainly at an earlier stage in the educational process.

Frequently business leaders, lawyers, politicians and, importantly, other members of civil society, do not have much familiarity with basic economic principles, international economics and international economic institutions, and more specifically about the economic and political benefits of a sound international trade, investment and competition policies. Without this knowledge it is difficult to appreciate the economic benefits of open markets, international trade and sound competition laws.

The WTO is an essential plank of globalization. Imperfect and ­incomplete as WTO disciplines are, they provide a degree of predictability and stability to trade relations, the value of which has been brought home yet again by the 2008–2009 financial crisis. In a world of sluggish growth and burgeoning protectionist pressures, the importance of rules increases and the need to tighten them becomes more urgent.

The need for reform

However, to a worrying degree, the WTO is today living off the gains of its predecessor, the GATT system. In crucial aspects of its traditional mission, namely reducing actual and bound (i.e. maximum allowable) tariffs, the institution has become increasingly ineffectual. No new trade liberalization in goods and no new lowering of bound tariffs have been agreed under multilateral negotiations since the Uruguay Round concluded in 1994.

In newer areas, such as cutting agricultural subsidies and opening up the markets for services trade, the WTO has so far failed to deliver on its promise. Sluggish WTO negotiations have been overtaken and sidelined by unilateral (i.e. autonomous) liberalization as well as bilateral and regional processes.

Though the Doha agenda is reduced to a shadow of what was launched in December 2001, its conclusion is critical to capturing the gains still on the table and to preserving the system's credibility. The G-8 meeting held in L'Aquila, Italy, in July 2009 called for a conclusion of the negotiations by the end of 2010, and given the long history of missed deadlines and the time needed for ratification, it is unlikely that implementation can begin before the end of 2011, the tenth anniversary of the start of the negotiations.