xiiiEXECUTIVE SUMMARYEXECUTIVE SUMMARYTRADE IN A GLOBALIZING WORLDInternational trade is integral to the process of globalization. Over many years, governments in most countries have increasingly opened their economies to international trade, whether through the multilateral trading system, increased regional cooperation or as part of domestic reform programmes. Trade and globalization more generally have brought enormous benefits to many countries and citizens. Trade has allowed nations to benefit from specialization and economies to produce at a more efficient scale. It has raised productivity, supported the spread of knowledge and new technologies, and enriched the range of choices available to consumers. But deeper integration into the world economy has not always proved popular, nor have the benefits of trade and globalization necessarily reached all sections of society. Trade scepticism is on the rise in certain quarters, and the purpose of this year’s core topic of the World Trade Report, entitled “Trade in a Globalizing World”, is to remind ourselves of what we know about the gains from international trade and the challenges arising from higher levels of integration. The Report explores a range of interlinking questions, starting with a consideration of what constitutes globalization, what drives it, the benefits it brings, the challenges it poses and what role trade plays in this world of ever-growing inter-dependency. We ask why some countries have managed to take advantage of falling trade costs and greater policy-driven trading opportunities while others have remained largely outside international commercial relations. We also consider who the winners and losers are from trade in society and what complementary action policy-makers need to take in order to secure the benefits of trade for society at large. In examining these complex and multi-faceted questions, the Report reviews both the theoretical trade literature and empirical evidence that can help to give answers to these questions.GLOBALIZATION AND TRADEThe key economic features of globalization constitute deeper integration in product, capital and labour markets. Globalization is not a new phenomenon. Since the mid-19th century, there have been at least two episodes of globalization. The most recent period of globalization starting in the immediate post-World War II period, strongly bolstered by new communications and transport technologies, has been marked by a prolonged period of strong trade and economic growth. TRENDS IN GLOBALIZATIONGlobalization has caused significant structural changes in parts of the world economy. Some countries and economic sectors have been able to take advantage of these structural changes better than others. In the first decades after World War II, Europe and Japan were important beneficiaries of globalization as they sought to restructure their economies. In more recent years, newly industrializing economies have been among the major winners from increasing economic integration. A long-term shift in the composition of world merchandise trade has occurred, with the share of manufactured goods rising dramatically, against a decline in agricultural products and non-fuel minerals. The domination of developed countries in world exports of manufactures has been greatly diluted, first in labour-intensive goods (such as textiles and clothing) and subsequently in electronic products and capital-intensive goods (such as automotive products).Global trade growth was less dynamic after the oil crisis of 1973, while migration and foreign direct investment (FDI) flows accelerated, especially from the mid-1980s onwards. Migration differed between the two globalization periods referred to above, as many earlier sources of emigration (especially Western Europe) became destination points. South to North migration flows increased in importance, while South-South flows continued.Capital flows have always played a prominent role in the globalization process. In the last few decades liberalization and deregulation have contributed strongly to a surge in FDI flows. But regions have been affected differently, with important consequences for the development of technological know-how and the geographical pattern of industrialization.xivWORLD TRADE REPORT 2008MAIN DRIVERS OF GLOBALIZATIONThe main forces driving global integration have been technological innovation, political change and economic policy choices. Chief among the technological drivers of globalization are inventions that have improved the speed of transportation and communications and lowered their costs. These include the development of the jet engine, containerization in international shipping, and the revolution in information and communications technology. Equally notable are changes in production methods which have created new tradable products, expanded global production in food and made manufacturing more efficient. Political developments in the last decades of the 20th century sowed the seeds of further economic integration. These include China’s economic reforms, the fall of the Berlin Wall and the collapse of the Soviet Union. Finally, globalization has benefited from economic policies favouring deregulation and the reduction or elimination of restrictions on international trade, foreign investment and financial transactions. Trade opening has been pursued multilaterally through successive multilateral negotiations, bilaterally and regionally through preferential trade agreements and unilaterally. In the case of many developing countries, early commercial policies had an inward-looking focus. But the success of a number of newly industrializing economies in East Asia with export-led growth strategies contributed to a more general adoption of industrialization policies that recognized the importance of exports in the process. GLOBALIZATION ANDPUBLIC ATTITUDESGlobalization has benefited the world economy but concern has intensified about its potentially disruptive and disadvantageous consequences.Global integration in product, capital and labour markets has resulted in a more efficient allocation of economic resources. Economic integration has resulted in higher levels of current output and prospects of higher future output. Consumers have a wider choice of products and services at lower prices. Capital can flow to countries which need it the most for economic growth and development. Allowing workers to move across national