Under the wave of anti-globalization, multilateralism as an important achievement of globalization has felt the impact. The WTO has lost its power, the global climate cooperation agreement has failed, and the multilateral free trade agreements were either being canceled or forced to re-negotiate. With the strong impacts of the Trump administration, the world seems to have a big step backward.
Concerning the chaotic situation in the world today, Anbound's chief researcher Mr. Chan Kung pointed out in an internal discussion that looking from the history of global trade financial development; it is difficult for the bilateral and multilateral agreements to be free from the Zeitgeist. This means that the success of multilateral and bilateral agreements has its own background, and such background is not static and unchanged. In fact, in response to fluctuations of various eras, when multilateral agreements prevail, that would be the era of globalization; when it is the era of bilateral agreements, it would be the time of national relations and competition.
On October 30, 1947, the General Agreement on Tariffs and Trade (GATT) was signed in Geneva by 23 countries led by the United States; this was an agreement that promotes the liberalization of international trade and this indicates the emergence of the world's multilateral free trade policy. After the implementation of the GATT, there had been several global multilateral trade negotiations. As of 2016, nine multilateral trade negotiations have been held under the organization of the GATT/WTO. The emergence of GATT has greatly promoted global trade. Before the industrial revolution, the world trade growth rate was only 0.27%, which is extremely low. By the 1950s to 1970s, due to the emergence of GATT, trade between countries was more frequent, trade barriers were gradually reduced, trade frictions could be effectively negotiated, and global trade was greatly developed. The growth rate of world trade was comparable to that of 200 more than before the industrial revolution. This period is the golden age of global multilateral free trade development. At the beginning of GATT, there was only one developing country, accounting for less than 5% of the total members. In 1973, there were 56 developing countries joining, accounting for 68% of the total members. In 1995, the percentage of developing countries joining GATT was nearly 80%. The world trade pattern previously was dominated by developed countries, and now we see more and more developing countries are involving in it.
As more and more countries joining the GATT/WTO, problems in the development of global multilateral free trade agreements had also been gradually emerging. Because of the large membership of the WTO, it is difficult for member states to reach a consensus in the negotiation process of the multilateral trading system. At the same time, the insurmountable shortcomings of the WTO itself make the WTO multilateral trade negotiations increasingly difficult. In addition, some regional free trade zone plans have not been implemented as scheduled, and more and more countries are turning to bilateral free trade agreements (FTAs), such as those outside the multilateral trading system. A bilateral free trade agreement is an agreement between two or more independent customs entities on the basis of WTO rules and a voluntary term for trade liberalization and related issues. The new generation of bilateral FTAs has won the favor of all countries because of its wide range, flexibility, simple operation, quick effect, and strong binding force. In the 1980s, the resistance of WTO multilateral trade negotiations continued to increase. All countries in the world favored bilateral free trade because of its advantages in promoting trade liberalization. The bilateral free trade fever appeared in the world and began to prevail globally in the late 1990s.
It is clear from the above history that global multilateral and bilateral agreements appear alternately. The interests of global trade participating countries would be different depending on the eras; multilateral and bilateral trade agreements will alternate, and bilateral trade is also used to avoid trade disputes. As early as the 1930s, Germany had signed bilateral agreements with more than 20 countries to evade pressure and sanctions from the United States. This is not accidental, nor can it be restrained by ideology.
Mr. Chan Kung believes that the evolution of trade history shows that this is how the real world functions. Now even the United States is engaged in small-scale multilateral and bilateral agreements, and this is done rapidly. If China is hesitant in this regard, there could be huge problems. For China, if multilateral agreements can be adhered to, of course, it should be done within the possibility, but it is better to establish a small-scale multilateral agreement. What is even more troublesome is that even small-scale multilateral agreements could be difficult to be done in the future. After all, when the opportunity is lost, it would not come again. The only way is to return to bilateral agreements and do things slowly. For this reason, the establishment of bilateral agreements should become a strategy for China.
As for the U.S.-China trade confrontation, or "trade war", Anbound has already pointed out that this is a long-term matter that may be eased but will not disappear. The key point of this trade war is that it is not about trade or business at all. Mr. Chan Kung believes that there are five key points to look at from a historical perspective: First, has the larger pattern of world politics changed? Second, is there any breakthrough in technological progress? Third, has the larger pattern of global currencies changed? Fourth, have the ideology and civic awareness, that is, the trend of the times, seen the transformation? Fifth, have the climate, environment, and resources changed? If there are no major changes in the five key points, then the trade war will continue for a long time, ranging from seven or eight years to more than ten years. Will it be longer? Mr. Chan Kung thinks that it would be unlikely, because usually a historical period is not so long, and if it is any longer it will last for two or three generations; no country in the world would be strong enough to bear this. If the five key points have really undergone major changes, then it can be said that the future civilization will change dramatically, and humanity will usher in a new era, though we would not know if we can see the arrival of this day, this day will certainly come.
Final analysis conclusion:
From the perspective of world trade and financial history, the development of changing from the era of multilateral to bilateral agreements is cyclical. If there is a major turning point at the above-mentioned key points, it will be possible to usher in a new era; if there is no change, the current era of trade conflict will be long-term.
