The Future of Global Trade: Jon Huntsman on the Radical Change Ahead
Trade will be more important than ever 30 years from now. And a lot more complicated to regulate.
ILLUSTRATION: RYAN ETTER FOR THE WALL STREET JOURNAL
Two years after I was born, President John F. Kennedy created the Office of the Special Trade Representative, a brief forerunner to today’s U.S. trade representative. Expanded exports and open markets were central to our economic-security efforts to reconstruct Europe and Japan and keep lower-income countries free from communism.
In calling for a new round of global negotiations following the Trade Expansion Act of 1962, President Kennedy stated, “Our efforts to maintain the leadership of the Free World thus rest, in the final analysis, on our success in this undertaking.” He succeeded beyond his wildest dreams, with a new era of globalization coming after the end of the Cold War aided by 3.5 billion new customers entering the marketplace.
Thirty years from now, world trade will be in the midst of another radical transformation—one no less critical to America’s 21st century leadership or to the expansion of global growth prospects.
For millennia, international commerce has focused on the exchange of physical goods (including people when there was slavery). More recently, services have become an ever-increasing component of advanced economies and world trade. This trend will continue and bring with it greater complexity for those setting the rules and negotiating the deals.
In general, manufacturing will be more localized; services, especially health and retail, more personalized; today’s ubiquitous shipping containers will be replaced by 3-D and 4-D printers, and the designs for making physical goods locally will move at the speed of light over airwaves just as financial flows do today. As urban farming gets going, food will be produced closer to the market, cutting transportation costs and reducing trade in agriculture.
Need for nurture
The best ideas, however, will continue to need nurturing from outside—evidenced by the vast majority of patents that result from international scientific cooperation. Whereas today the world economy is replete with far-flung supply chains for manufacturing physical goods, it will be the free flow of designs and ideas that will increasingly constitute the economic linkages of the future. The protection of intellectual property will be incredibly difficult, but remain critically important.
Urbanization will produce a shift in populations and create more global centers of excellence for innovation. Whereas today we have a handful, 30 years from now there will be dozens of cities that serve as hubs of global trade in ideas. This proliferation of empowered megacities and centers of creative innovation will challenge geographic borders, making it hard for capitals to call the shots.
Trade flows will reflect the realities of global power as well as demographics. The Pacific will no longer be the dominant trade hub. Instead, the focus will shift to the Indian Ocean region, which upward of eight billion people—mainly in China, India and Africa—will call home. The U.S. may not be in a position to influence trade the way it did. For the past 200 years, Britain, after the Industrial Revolution, and the U.S. after the two world wars, fought for an open trading system to promote growth. None of the emerging countries have thus far shown that same commitment, even though they—particularly China—are increasingly setting the pace in world trade. China eclipsed the U.S. as the biggest trading country in 2013.
Moreover, today’s governing bodies for trade, such as the World Trade Organization, may not have a monopoly in running the global trade system. Recent initiatives such as the New Development Bank and the Asian Infrastructure Investment Bank are likely to be early drafts of grander designs for alternative institutions established by the emerging powers.
Talent competition
While mostly positive, the transformation of global trade will also create challenges. For one, how will a country attract and retain the world’s best and brightest talent? There will be no guarantee that people will stay if your country isn’t moving toward competitive best practices.
How will society respond to a world that richly rewards educated innovators while ignoring increased income inequality? The simple truth is that the growth of disruptive technologies isn’t likely to ensure many well-paying jobs. High-tech skills will be at a premium, empowering some, but many high-skill jobs will be increasingly done by automation.
Combined with other future trends, our prospects are bright. There is good news for the environment. The world we live in will be less reliant on traditional fossil fuels. A shift toward natural gas will make manufacturing cleaner and the air more breathable. We will also be that much closer to a complete embrace of renewable power. With the development of alternative fuels, we won’t rely as much on long energy supply chains that span the globe.
People will also live longer. There will be less disease. Consumers will benefit enormously from the changes in world trade that will deliver, among other things, personalized medicine and greater access to life-changing science and pharmaceuticals. Choices will be expanded, distances shortened, and manufacturing will be cheaper and tailored to specific needs.
The world will be a far better place than even President Kennedy could have imagined.
