International trade, global economic governance and welfare

Abstract

Trade has always been an important form of economic relationship between people of different communities and countries. International trade in the period after the Second World War laid the basis for the kind of international economic integration we now associate with globalisation. This chapter reviews how the international trading system and its governance has developed in the post-war period, what forms trade policy-making takes, and how trade relates to the welfare state and ‘welfare’ more generally. It begins with a discussion of the different ways that economists and social policy analysts think about welfare, and why trade is important for social policy. It then explains how the trading system has developed in the post-war period, before looking in detail at trade policy-making processes and institutions as core parts of global economic governance. The role of the World Trade Organization (WTO) and the centrality of bargaining between states is explained. The final section examines in detail the social policy implications of international trade, focusing on the relationship between the welfare state and trade. The development of capitalism as an economic system has been intimately entwined with the development of national states. States have played a crucial role in facilitating the development of capitalism through providing a system of law and contract that guarantees the rights of property owners and sets a framework within which exchange can take place, as well as legitimising and regulating a common currency. Of course, trade across the borders created by these states has taken place as long as those borders have been in place, but the existence of national institutions, governments and currencies has meant that such trade is necessarily international, that is, it takes place between countries as well as between specific individuals or firms.