Another great post by Michael Pettis, this time on policies/factors that have an effect on international trade, with the GM bailout as the main illustration.

Here is his main point:

One of the reasons why trade-related discussions can seem so off-the-mark, I think, is because the conditions governing international trade are much more complex than we often realize. The determinants of the international balance of trade basically include anything that affects domestic consumption and domestic production, which pretty much means nearly everything in economics. Among other things this means that there is a very wide range of government policies that can affect trade – sometimes explicitly and sometimes implicitly.

I don’t think it is inaccurate to state that as the international economy expands and countries become more and more interdependent, this is inevitably what you get. I would also like to point out that in addition to all the factors and policies Pettis discusses, there is the vast area of non-tariff barriers to trade (NBTs), including technology and environmental standards, intellectual property, health and safety measures, licensing, etc. If you’ve shipped products into China, you are no doubt familiar with some of these issues. As it becomes more difficult to slap on tariffs, anti-dumping and non-tariff barriers proliferate.

For me, the question is how best to deal with this global economy from an international/WTO law perspective. There is a very real issue out there that worries some nationalists. If more and more domestic policies have an effect on international trade, then the effective jurisdiction of the WTO will continue to expand. In the U.S., this particularly freaks out conspiracy theorists on the far right.

Seems to me that if it gets to the point where an increasing number of domestic policies are being challenged by WTO members, we will have a governance crisis with that body, which is not at all equipped to handle a large volume of disputes and has serious flaws with respect to enforcement. The WTO will either fall apart at some point in the future or it will be beefed up with an expanded jurisdiction and enforcement procedures.

Will this lead to the infamous New World Order? I sure hope so.