The Collapse of 80 Years of Trade and Economic Integration

Tariffs, security politics and regulatory complexity are rewiring the global economy Deborah Elms of the Hinrich Foundation discussed causes and effects of the decline of the international trade system. by Sophia Schechner, National Press Foundation The global trade system that has been nurtured and supported over the last eight decades is now experiencing unprecedented disruption. However, this collapse lacks the presence of traditional catalysts that marked previous ones, such as world wars or economic depression. Deborah Elms, head of trade policy at the Hinrich Foundation, explained that this modern transformation stems from multiple converging factors, one major component being the governance gridlock arising from the expansion of the World Trade Organization from 24 to 166 member countries. “Imagine if you had 166 people in a room and we all had to order lunch. How difficult is it if all 166 of us had to agree where to go and what we were going to eat, and if anyone objected to those choices, nothing happened?” Elms said. “At 24, it’s not easy to do, but you can manage to eat lunch. At 166, it is very challenging to get some kind of integration cooperation. So the system itself has grown. The complexity has grown.” Another complicating factor is the rise of protectionist policies imposed by the United States, as well as American investigations into other countries’ allegedly unfair trade practices. “All 60 U.S. trading partners covering 99% of U.S. trade imports and goods are all accused, found guilty, and about to be dinged with very high tariffs,” Elms explained. “The net result of this shows you the level of disconnect between this current administration in the U.S. and previous U.S. administrations, including the first Trump administration, where they did use Section 301 [tariffs] against China and only against China. Now it’s against everybody for everything.” The outcome of these issues, combined with structural challenges like climate change and digital transformation, is a fragmented global economy characterized by alternative trade routes, bilateral agreements and regional partnerships replacing the unified multilateral framework. While this disruption presents opportunities for economic realignment and the creation of new trade structures, it simultaneously increases costs and complexity for businesses, particularly constraining developing economies and small firms. Businesses continue to navigate unprecedented challenges in investment screening, technology divergence and supply chain reconfiguration while attempting to preserve the institutional frameworks necessary for eventual global economic cooperation. Elms highlighted key regional trade agreements that are gaining importance as companies and governments seek stability and standardization, such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). “It has just been a whirlwind of crazy trade policies that are hard to keep track of … and particularly hard to understand what the second, third, and fourth order consequences will be,” Elms said. “I think that is challenging to figure out, unravel what that looks like, especially when we keep dumping more into the hopper of trade policy changes.” Speaker: - Deborah Elms, Head of Trade Policy, Hinrich Foundation This video was produced within the Evelyn Y. Davis studios. NPF is solely responsible for the content. This fellowship is part of an ongoing program of journalism training and awards for trade coverage sponsored by the Hinrich Foundation.