World History 2 261 - 15.1.1 Global Trade

Even during the Cold War and decolonization, economic development and industrialization continued around the world. Japan and West Germany, destroyed and defeated in the 1940s, were striking examples. Each dove headlong into postwar rebuilding efforts that paid huge dividends. They invested heavily in their economies and saw industrial production and economic growth skyrocket over the 1950s and 1960s. By 1970, both had become economic powerhouses in their regions.

Similar, but smaller, economic miracles occurred in other places, especially in Europe. Spain underwent a period of spectacular growth fueled by imported technology, government funding, and increased tourism and industrialization in the 1960s. Italy began even earlier. By the early 1960s, its annual gross domestic product (GDP) growth—the increase in value of all the goods and services the country was producing—had peaked at just over 8 percent. France bounced back from the war years with a rise in population and an impressive new consumer culture that became accustomed to a high standard of living and access to modern conveniences like automobiles, televisions, and household appliances. Comparable growth occurred in Belgium, Greece, and the Netherlands.

Contributing to this postwar economic growth was the emergence of regional economic cooperation in Western Europe. The process began with the creation of the European Coal and Steel Community (ECSC) in 1951. The original member countries of the ECSC were West Germany, France, Italy, the Netherlands, Belgium, and Luxembourg. To both foster economic integration and preserve the peace, these member states agreed to break down trade barriers between them by creating a common market in steel and coal. Across the six countries, these products were allowed to flow without restrictions, like customs duties.

The success of the ECSC eventually paved the way for further economic integration in Europe with the formation of the European Economic Community (EEC), also called the Common Market, in 1957. The EEC used the economic-cooperation model developed by the ECSC and greatly expanded it to remove trading and investment restrictions across its member states, far beyond just coal and steel. While generally successful, the EEC’s efforts at economic integration occasionally met resistance. Farmers who stood to lose economically protested the way it opened national markets to agricultural products produced more cheaply in other countries and sought protectionist policies. Yet despite these protests and concerns, the EEC continued to expand.

Although Britain supported the EEC’s economic goals, it was initially not interested in the political cooperation the group represented. When it did signal its desire to join, Britain wanted special protections for its agriculture and other exceptions for its Commonwealth connections, such as Canada. This meant negotiating with France, then the EEC’s most powerful member. Since decisions at that time were made unanimously and member countries had the power to unilaterally veto, France’s approval was crucial. President Charles de Gaulle of France did not approve, however, and he cut off negotiations with Britain in 1960. Over the next several years, Britain officially applied for EEC membership twice: in 1961 and again in 1967. Both times de Gaulle worried that admitting Britain, with its strong ties to the United States, would transform the organization into an Atlantic community controlled by Washington. Britain was admitted in 1973 (along with Denmark and Ireland), when de Gaulle was no longer president of France. But many in the United Kingdom had wanted to stay out, especially those in the Conservative Party. It took a UK referendum in 1975 to confirm the country’s EEC membership.

In Their Own Words

Charles de Gaulle Vetoes British Admission to the EEC

In January 1963, French president Charles de Gaulle made the following statement at a press conference explaining his opposition to Britain’s application to join the EEC or Common Market:

England in effect is insular, she is maritime, she is linked through her exchanges, her markets, her supply lines to the most diverse and often the most distant countries; she pursues essentially industrial and commercial activities, and only slight agricultural ones. She has in all her doings very marked and very original habits and traditions. [. . .]

One might sometimes have believed that our English friends, in posing their candidature to the Common Market, were agreeing to transform themselves to the point of applying all the conditions which are accepted and practised by the Six [the six founding members: Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany]. But the question, to know whether Great Britain can now place herself like the Continent and with it inside a tariff which is genuinely common, to renounce all Commonwealth preferences, to cease any pretence that her agriculture be privileged, and, more than that, to treat her engagements with other countries of the free trade area as null and void—that question is the whole question. [. . .]

Further, this community, increasing in such fashion, would see itself faced with problems of economic relations with all kinds of other States, and first with the United States. It is to be foreseen that the cohesion of its members, who would be very numerous and diverse, would not endure for long, and that ultimately it would appear as a colossal Atlantic community under American dependence and direction, and which would quickly have absorbed the community of Europe.

It is a hypothesis which in the eyes of some can be perfectly justified, but it is not at all what France is doing or wanted to do—and which is a properly European construction.

Yet it is possible that one day England might manage to transform herself sufficiently to become part of the European community, without restriction, without reserve and preference for anything whatsoever; and in this case the Six would open the door to her and France would raise no obstacle, although obviously England’s simple participation in the community would considerably change its nature and its volume.

—Charles de Gaulle, Veto on British Membership of the EEC

  • Why does de Gaulle note that Britain’s relationship with the United States is a problem?
  • What does this statement suggest about the special protections Britain wanted in order to become an EEC member?
  • Do you think that de Gaulle was right to worry about the influence of the United States? Why or why not?

By 1993, the EEC had been integrated into the newly created European Union (EU), which had grown to fifteen member states by 1995 and in 2022 included twenty-seven member states (Figure 15.3). The EU was conceived as a single market for the free movement of goods, services, money, and people. Citizens of member countries can freely move to other EU countries and legally work there, just as they can in their own country. In 1999, the EU introduced its own currency, the euro. Initially used only for commercial and financial transactions in eleven of the EU countries, euro notes and coins had become the legal currency in the majority of EU countries by the start of 2002. The euro was not universally adopted by member states, though. The United Kingdom, Denmark, Sweden, and a few others kept their own currencies. The adoption of the euro was swiftly followed by a major expansion of the EU to include several Central and Eastern European countries including Poland, Hungary, and the Czech Republic.

A map of Europe is shown. Portugal, Spain, France, Italy, Ireland, Belgium, Luxembourg, Netherlands, Germany, Sweden, Finland, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Greece, Croatia, Cyprus, Slovenia, and Austria are highlighted blue. The rest of Europe is highlighted gray.
Figure 15.3 From the six founding states (Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands) that signed the Treaty of Paris in the early 1950s, the European Union has grown to include twenty-seven member states in 2022. (credit: modification of work “European Union map” by “Ssolbergj”/Wikimedia Commons, Public Domain)

In 2016, however, 52 percent of the citizens of the United Kingdom voted to leave the EU, and Britain officially cut its ties with the organization, its largest trading partner, on January 31, 2020. Some EU opponents in the United Kingdom had claimed the group was economically dysfunctional, especially after the recession of 2008, and that it reduced British sovereignty. Many also disliked the fact that its membership in the EU made it easier for people from elsewhere in Europe, including recent immigrants from the Middle East and Africa, to enter Britain. Those who wanted to stay argued that leaving would hurt British trade with Europe and make Britain poorer. Some also argued that losing the trade advantages that came with belonging to the EU could result in shortages in stores and more expensive products.

The breakup, colloquially known as “Brexit,” was hardly amicable. In Britain, many who supported staying in the EU were shocked by the decision and demanded a re-vote, though none was taken. In Europe, the European Parliament, the EU’s legislative body, was angry that Brexit might threaten the entire EU project. To show its displeasure and possibly to deter any other member states from leaving, the European Parliament wanted the separation to be as painful for the United Kingdom as possible, and many member countries supported this hardline stance. In today’s post-Brexit world, there are new regulations on British goods entering the EU and no automatic recognition of British professional licenses in the EU. Britons seeking to make long-term stays in EU countries now must apply for visas.

Among the forces driving European economic integration was a desire for Europe to be more independent of the United States. This wish was understandable given the massive economic and political power the United States began wielding after World War II. Not only did the United States possess a huge military force with a global reach and growing installations in Europe and beyond, but its economic strength was the envy of the world. Having experienced the Great Depression in the years before the war, the United States emerged after it as an economic powerhouse with a highly developed industrial sector. More importantly, with the exception of the attack on Pearl Harbor, it had avoided the wartime destruction experienced in Europe and Asia. As a result, not only was it able to provide funds to war-torn nations to rebuild their economies and their infrastructure as part of the Marshall Plan, but U.S.-manufactured goods also flooded into markets around the world. By 1960, U.S. GDP had grown to $543 billion a year (in current dollars). By comparison, the United Kingdom had the second-largest economy with a GDP of $73 billion (in current dollars).

The economic might of the United States brought unprecedented growth and a rise in the population’s standard of living in the decades after the war. With ready access to well-paying industrial jobs, the middle class boomed in the 1950s and 1960s. Their buying having been restrained during the war years because of the rationing of goods, consumers were eager to use their wartime savings to purchase new automobiles, televisions, household appliances, and suburban homes. Many enjoyed steady employment with new union-won benefits like weekends off and paid vacations. They also began sending their children to college in ever-greater numbers. By 1960, about 3.6 million young students were enrolled in higher education, an increase of 140 percent over the previous two decades. For many, access to higher education was the gateway to the middle or upper class.

By the 1970s, the U.S. economy began to cool, partially because of domestic inflation and increased competition from abroad. Oil embargoes by Arab nations belonging to the Organization of the Petroleum Exporting Countries, in retaliation for U.S. support of Israel during the 1973 Arab-Israeli war, and a general strategy by oil-producing nations to raise their prices, further stressed the economy by creating gas shortages for consumers. Other countries that had supported Israel, such as the Netherlands, also suffered from the embargo. Once dominant in most major industrial sectors, including the production of steel and automobiles, around the world, by the end of the 1970s, U.S. manufacturers were suffering as a result of competition from Japan and Western Europe. This reality led to a number of difficult economic transformations in the United States. But it also encouraged some national leaders to seek regional international economic integration along lines similar to Western Europe’s achievement. Beginning in the 1980s, the United States and Canada entered into negotiations to create their own regional free-trading zone. This made sense because Canada not only shared a long border with the United States but was also its largest trading partner. In 1988, the two countries agreed to the Canada-U.S. Free Trade Agreement (Canada-US FTA), which eliminated barriers to the movement of goods and services between the two.

Almost immediately, Mexico signaled its interest in creating a similar free trade agreement with the United States. U.S. president Ronald Reagan had floated the concept during his 1980 election campaign. But successful completion of the Canada-US FTA convinced Mexican leaders that the time was ripe to act on the idea. Ultimately, Canada joined the plan with Mexico as well, and by the end of 1992, all three countries had signed the North American Free Trade Agreement (NAFTA) (Figure 15.4). The intent of NAFTA was to reduce trade barriers and allow goods to flow freely among the three countries. Despite considerable resistance within the United States, largely from industrial workers who feared their factories and jobs would be relocated to Mexico where wages were far lower, the agreement was ratified by all three countries and went into effect in 1994.

Two images are shown. (a) The picture on the left shows two men and one woman sitting at a table with a bright blue tablecloth, looking down at the table with pens in their hands. Three men stand behind them. The man on the left sitting down has a dark suit, red and blue striped tie, moustache and is balding on the sides. The woman sitting next to him is wearing a pink jacket, a pink and white blouse, and has short brown hair. The last man sitting on the right has a dark suit, white shirt, and polka dot tie. His hair is silver and he wears glasses. The three men standing behind them all wear dark suits, white shirts, and ties. The man on the left has a moustache and is bald on top while the other two men have black and silver hair. Behind them are four flags – going from left to right – the first one has green on the top and then white with a red image on it, the next one shows a blue background with white stars, then the next one is red on top and the last one has red on top then white with a red point sticking out. There is a large tree behind them with green leaves. (b) The image on the right shows North and South America, Europe, Africa, and most of Asia along with the Equator. All of North America and half of Central America are highlighted yellow and the rest of the countries are highlighted white.
Figure 15.4 (a) At the signing ceremony for NAFTA in October 1992, Mexican president Carlos Salinas de Gortari, U.S. president George H. W. Bush, and Canadian prime minister Brian Mulroney (left to right) stand behind their respective trade secretaries. (b) The three countries had spent several years hammering out the agreement. (credit a: modification of work “NAFTA Initialing Ceremony, October 1992” by George Bush Presidential Library and Museum/Wikimedia Commons, Public Domain; credit b: “World map blank shorelines” by Maciej Jaros/Wikimedia Commons, Public Domain)

The creation of Canada-US FTA and later NAFTA represented an important policy shift for the United States. Until the early 1980s, the country had largely avoided limited regional trading deals, preferring instead to seek comprehensive global agreements. Such efforts had begun relatively soon after World War II in the form of the General Agreement on Tariffs and Trade (GATT), signed in 1947 by twenty-three countries. Initially conceived as a way to reinforce other postwar economic recovery efforts, GATT was designed to prevent the reemergence of prewar-style trade barriers, to lower trade barriers overall, and to create a system for arbitrating international trade disputes. Since its initial acceptance in 1947, GATT has undergone a number of revisions, completed in sessions referred to as rounds, to promote free trade and international investments.

In 1995, at the Uruguay Round, GATT transformed itself into the World Trade Organization (WTO) and cleared the path for free trade among 123 countries. Like GATT, the intent of the WTO was to support international trade, reduce trade barriers, and resolve trade disputes between countries. Unlike GATT, however, the WTO is not a free trade agreement. Rather, it is an organization that ensures nondiscriminatory trade between WTO countries. This means that trade barriers are allowed, but they must apply equally to all members. Many observers saw the creation of the WTO as a triumph of globalization, or the emergence of a single integrated global economy. China joined in 2001, a clear sign of its integration into global market systems.

Because the WTO is regarded as a major force for globalization, its meetings often attract protestors who oppose corporate power and the economic, political, and cultural influence of wealthy nations in the developed world on less-developed nations. In 1999, in Seattle, Washington, a diverse group of students, labor union representatives, environmentalists, and activists of many kinds protested the abuses associated with globalization. Police confronted activists staging marches and sit-ins with rubber bullets and tear gas, and trade talks ground to a halt. Meetings of the WTO continue to attract protestors.

As the creation of the EU and NAFTA demonstrate, the signing of international trade agreements like GATT, which was ratified by countries on six continents, did not prevent regions from establishing their own free trade blocs like MERCOSUR, the South American trading bloc created in 1991. Nor have such blocs been confined to the West. The most notable to emerge in Asia are the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC) (Figure 15.5).

Two images are shown. (a) The image on the left shows a rectangular stamp. In the middle is the image of a lady standing in a grassy field, in front of a tree and mountains. She is wearing a pink, long-sleeved shirt, brown and white striped skirt, heeled sandals, and a blue scarf over her left shoulder while holding a wooden, slatted instrument. Below her the words “Republik Indonesia” are written in red, and above her head the words “Visit Asean Lands 1971” are also written in red. “Angklung” is written along the right from top to bottom in red. At the left in blue is the number “50.” Across the top of the stamp on the left is a maroon pentagon with a gridded circle and a bird drawn inside. In the middle are the words “Visit Asean Lands” in blue with “1971” written on the right in maroon. Along the left side of the stamp in blue, white and yellow, is a drawing of an elephant with their trunk up among flower and tree designs and a pointy yellow mountain in the background and blue striped swirling clouds. Along the right side there are papayas, bananas, pineapples, and other various fruits drawn in yellow with blue designs surrounding them. Across the bottom of the picture is a drawing of a horse pulling a covered carriage with a driver in white and blue on a yellow background with flowers. (b) The image on the right side shows land and islands in Southeast Asia. The areas are highlighted varying shades of green. The countries and their colors are, from north to south: Myanmar (dark green), Laos (green), Vietnam (light green), Thailand (light green), Philippines (dark green), Cambodia (dark green), Brunei (light green), Malaysia (green), Singapore (dark green), and Indonesia (dark green).
Figure 15.5 This 1971 postage stamp (a) from Indonesia celebrates the country’s membership in ASEAN, whose member countries are highlighted in the map (b). (credit a: modification of work “Stamp of Indonesia - 1971 - Colnect 257406 - Visit ASEAN South East Asian Nations Association Year” by Colnect/Wikimedia Commons, Public Domain; credit b: modification of work “Map of ASEAN member states” by “Hariboneagle927”/Wikimedia Commons, Public Domain)

ASEAN had its beginnings in the 1960s when Indonesia, Malaysia, the Philippines, Singapore, and Thailand agreed to cooperate economically to foster regional development and resist the expansion of communism in Asia. Largely successful, the organization expanded in the 1980s and 1990s to include more countries. By the early 2000s, it was openly advocating the creation of EU-style integration in the area.

APEC, launched in 1989, was in many ways a response to the growth of regional trading blocs like ASEAN and the EEC. Initially composed of twelve Asia-Pacific countries including Australia, the United States, South Korea, and Singapore, it has since grown to include Mexico, China, Chile, Russia, and more. It promotes free trade and international economic cooperation among its members.

The content of this course has been taken from the free World History, Volume 2: from 1400 textbook by Openstax