While the debate on the ongoing World Trade Organization (WTO) conference in Bali intensifies, a new way of ordering global trade is slowly but surely emerging, ignoring the outcome of the bickering.
Sadly, it seems all participants in the debate are trapped in old-fashioned modes of criticism and are overlooking the perils of this novel trade order.
In general, three types of argument loom. First, one that asserts Indonesia's readiness to fully integrate into the network of global trade. Second, the WTO is viewed as a threat to national sovereignty. Third, the WTO is seen as merely a tool of the West to entrench its hegemony.
These arguments share a similar deep-seated assumption of state-centrism, one that views international trade as a problem of governance, regulation and manipulation of the state, unilaterally or multilaterally.
This assumption regrettably prevents them from objectively seeing the economy of international trade that takes place outside the problem of governance.
Economy is indeed a matter of governing, but what it governs is the activity of production. Production, thus, is at the heart of the economic problem. This is precisely what is missing from the debate.
Getting serious with the economy of contemporary international trade, one might focus on the way production is being organized globally, or more specifically the novelty of international trade as a new mode of the organization of production.
One thing that everybody must be clear on is that unlike in ancient times, in the modern economy production is never merely at the service of the fulfillment of needs, but is also mainly for profit.
For most people, production is for survival, but for the rest it is for the accumulation of wealth.
These are two sides of the coin of production that can never be separated. This is how we should see trade, as a convergence of two motives of production.
The profitable face of production today is evolving. It affects the systemic design of global trade
and what people do in order to survive. My latest research with the Collective Research Network (Jaringan Riset Kolektif/JeRK) found four inextricable ways of profiting from trade.
The first two are known: the direct exchange of goods in the market, and the financialization of goods, which transforms goods into various financial assets (stocks, bonds, derivatives, etc.) through many credit schemes/contracts.
The other two are quite new, but while they are relatively under-appreciated (especially outside academia), they are now renewing themselves. In the last decade, we witnessed the intensification of making profit through circulation. While the first two emphasize directness, the latter two stress an intermediary dimension.
The first of the two is the so-called global production network (GPN) and/or the global value chain (GVC) that profits from the circulation of goods in the net/chain.
In the agricultural realm for example, from 2001 to 2011, we saw an increase of 162 percent in the volume of trade in value-added commodities (World Bank). From 1991 to 2001, the increase barely reached 5 percent. Clearly, an intensification of the GPN/GVC is underway.
The second of the last pair is the infamous price speculation of financial products that profits from the price difference as a result of the constant trading of, to take the most daring example, derivatives products (forwards, futures and options). Let us look at the statistics.
In 2012, total merchandise trade globally reached US$18 trillion (WTO database), but its financial counterpart, the total amounts outstanding of over-the-counter (direct) derivatives, reached $633 trillion (BIS database). This demonstrates the highly attractive nature of the derivative market.
We could be stunned further if we look at what this attractiveness causes. In 2012, the volume of total trading of derivatives reached $1.160 trillion. This surpasses 20 times the world¡¯s total gross domestic product (GDP).
This is more than enough to acknowledge the hegemony of finance in today¡¯s economy, or precisely the dominance of making profit out of circulation, rather than out of direct exchange.
For those emphasizing the circulation of goods and derivatives, who profits from what and how much, real trade and stock dividends are not primary concerns. For them, what matters most is that trade continues, is sustainable and hence guarantees the circulation from which they profit.
Today's international trade has shifted away from the direct dimension of trade to one that emphasizes circulation. Any calculation of its direct dimension must adjust to the demand for circulation. This is the implication of the hegemony of the circulation paradigm of trade.
In this 2x2 matrix of profiting from trade, we must focus on the WTO and other trade-related regimes like, APEC.
The dominance of the circulatory mode of trade urges the trade regime to facilitate the sustainability of circulation, or what we call "sustainable trade".
The insistence on connectivity in the APEC agenda and on trade facilitation in the WTO agenda confirm the need for sustainable trade.
When our focus is captivated by the siren songs of the WTO and APEC to attend to the circulation of trade, then we will eventually leave out the real and direct problem of inequality in real and direct trade.
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