From Rome to Geneva: On the Significance of Trade

Rome’s decline does not mean that the US must decline as well. The rules and institutions of the world trading regime undoubtedly require reform.


by Michael R. Czinkota

( May 12, 2017, Washington DC, Sri Lanka Guardian) What gave Rome it’s preeminent power in the ancient world? No doubt its legionnaires were feared from Iberia to Galcantray. To fund military might the descendants of Romulus engaged in prolific international trade. Today, as globalization and international trade spark heated debates in capitals around the world, it is important to remember the long history of trade. From the Chinese to the Phoenicians, the Spaniards and the Dutch, the mighty British empire and the American industrial powerhouse, trade has been at the center of every great power in history. Great powers can either take that which they need by force, or buy it away. To most, trade is clearly preferable.

World trade today is shaped by rules and institutions that date back to the formative period of the modern era. Rising from the ashes of the second great war, the victorious powers considered the underlying problems that had fueled the conflict: financial instability and rampant inflation; the breakdown of the global trading system due to competitive tariff hikes. The impending victors attempted to ensure such that a tragedy never happen again. The rules they laid out still reverberate today.

At a hotel in Bretton Woods, New Hampshire, the leaders of the world met IN 1944 to lay out a new order. To provide for financial and exchange rate stability, the International Monetary Fund was formed. Hoping to avoid the Smoot-Hawley tariffs that drove the world deeper into depression, delegates conceived the General Agreement on Trade and Tariffs (GATT), a secretariat in support of meetings aiming to reduce tariffs and to promote trade. To help fund investments to rebuild and promote economic development, the World Bank was incorporated. These three pillars aimed to ensure greater stability for the international economy.

So far, the world has benefited greatly from these institutions. Trade continues to promote prosperity, and trade and investment flows stretch around the world like never before. However, these rules and institutions have been far from perfect. The IMF has been a target of much criticism over its pontifications and politically unpopular conditionality in providing financial relief. Trade liberalization has been driven by the GATT successor, now called the World Trade Organization (WTO). Countries also formed regional trade blocs like the North American Free Trade Agreement (NAFTA) and the European Union (EU). While trade creates winners and losers, “it all takes time” does not placate the losers of trade shifts. The ire of workers displaced by increased import competition affects attitudes and elections.

In the developed world, many take the existence of these institutions for granted. But politicians threaten withdrawal from the WTO, even if their election campaigns benefit from donations by trade supporting brands like Coca Cola, Microsoft, and McDonalds which span the globe. Though many call “globalization” an evil 13 letter dirty word, multinational exposure typically strengthens firms. Studies show that international businesses are less vulnerable to risks, and on average pay higher wages. Globally recognized brands raise the profile and competitiveness of products.

The old saying was, “all roads lead to Rome.” This was more than a commentary on Italian logistics. The power of the Roman empire derived from its extensive network of trade relations. Allies saw that it was more efficient and profitable to join them than to fight. Today, the roads all lead to Geneva, New York, and Washington D.C. – the homes of the WTO, the United Nations, and the IMF/World Bank, respectively. When Rome fell to barbarians, it was not for lack of arms, but weakness from within. Trade had made Rome strong, and the decline of trade foreshadowed the fall.

Rome’s decline does not mean that the US must decline as well. The rules and institutions of the world trading regime undoubtedly require reform. The latest negotiations, the Doha Round, have lasted well over a decade with little results. Rules need to be updated to reflect economic trends like the digital economy and trade in services. Systems need reform to prevent repeating past failures like the global financial crisis.

No one, and particularly not the US should cut itself off from the global system. Instead, there needs to be investment into workers and the development of a global mindset among business leaders. Global prosperity requires globally competent workers. Protectionism can’t achieve this. It requires better education, and encouraging the leaders of tomorrow to see the world and get international experience. All roads still carry the global trading system. Policy makers and future business leaders need to learn how to walk them.


Professor Michael R. Czinkota teaches international marketing at Georgetown University in Washington D.C. and at Kent University in Canterbury, UK. His key book (co-authored with Ilkka Ronkainen is International Marketing, 10th ed. by CENGAGE.

Author: Sri Lanka Guardian

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