The Evolution and Reshaping of Globalization: A Perspective Based on the Development of Regional Trade Agreements

• Date: 01 January 2019
• Author: Xiaozhuo Wang,Xiaohua Bao
• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/cwe.12267

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 51–71, Vol. 27, No. 1, 2019

51

The Evolution and Reshaping of Globalization:

A Perspective Based on the Development of Regional

Trade Agreements

Xiaohua Bao, Xiaozhuo Wang*

Abstract

With the weakening role of the World Trade Organization multilateral trading system,

the globalization pattern is moving toward regional economic integration. As a result,

the number of regional trade agreements (RTAs) has rapidly increased. New trends in

international economics and trade, such as the withdrawal of the US from the Trans-

Pacific Partnership and the trade disputes between the US and China, have revealed

the intention of the developed countries represented by the US to reshape the direction

of globalization. This paper combines the relevant research conclusions and current

stylized facts to examine the evolution and reshaping of globalization. We nd that:

(i) countries have different attitudes toward the recent round of globalization, which are

related to changes in the patterns of income distribution within countries caused by the

last round of globalization; and (ii) regional economic development is an effective way

to reshape globalization. The self-strengthening effect of the hub country in the trade

network has promoted global RTA expansion.

Key words: economic globalization, hubness, income inequality, regional trade agreements

JEL codes: F13, F15, P48

I. Introduction

Globalization has become increasingly prominent since the 1980s, and has largely

promoted trade and economic growth across the world. However, globalization results in

unequal income distribution among different countries and also among different interest

groups inside the same country. Thus, countries have different attitudes toward the

recent round of globalization and have declared their intention to reshape the direction

of globalization, which has promoted dynamic development.

*Xiaohua Bao, Professor, College of Business, Shanghai University of Finance and Economics, China. Email:

xhbao369@mail.shufe.edu.cn; Xiaozhuo Wang, PhD Candidate, College of Business, Shanghai University of Finance

and Economics, China. Email: 475789627@qq.com. We thank the referees for their thoughtful comments and

acknowledge the nancial support from the Natural Science Foundation of China (No. 71673177), the Social Science

Foundation of China (No. 18ZDA069) and the SHUFE Graduate Student Research Project (No. CXJJ-2016-339).

Xiaohua Bao, Xiaozhuo Wang / 51–71, Vol. 27, No. 1, 2019

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

52

Two stylized facts can be observed in the process of globalization. One is that the

world trade pattern has shown a multipolar development trend. Since the establishment

of the World Trade Organization (WTO), developing countries have entered a new stage

of rapid trade liberalization. During this period, the average most favored nation tariff

level of developing countries dropped from 14.76 percent in 1995 to 8.03 percent in

2015, a reduction of as much as 45.6 percent.1 The process of globalization has greatly

promoted trade in developing countries: the whole trade share of global exports was

22.5 p ercent in 19 95 and rose to 45.1 percent in 2015 (Figure 1). As a result of the

economic growth of developing countries, the world trade pattern has evolved from

American unipolarity to American–European bipolarity to American–European–Asian

tripolarity. At present, the regionalization of international trade has formed three major

trade bodies: the EU trade body with Germany as the core, the North American trade

body with the US as the core, and the East Asian economic integration body2 with China

and Japan as the core. In 2015, the total trade volume of the three major trade bodies

accounted for 14.1, 18.5 and 28.4 percent of global trade in goods, respectively, which

together accounted for 60 percent of the total global trade in goods. The service trade

volumes of the three major trade bodies accounted for 49.1, 16.3 and 14.4 percent of

global trade in services, respectively, which together accounted for 79 percent of the

total global trade in services. We can conclude that the development of global trade

has formed an interdependent trade network, in which some countries have assumed a

central role.

Figure 1. Proportions of Developing and Developed Countries in Global Trade, 1962–2015

Source: UN Comtrade.

1Authors’ calculation based on data from the World Bank website.

2The East Asian economic integration body includes 10 countries of the Association of Southeast Asian

Nations plus China, Japan and Korea.