Adjustment of the Global Trade System
The global economy has entered a new stage marked by profound adjustments in the political landscape and an upgrade in the rules of economic governance. In the realm of international political power transition, the international shifts in the world trade system are particularly pronounced. Power determines the role a nation plays in international relations, and the essence of world politics is fundamentally "power politics." In this new era where "de-globalization" trends and protective trade measures of "decoupling" are increasingly prevalent, it becomes essential to understand the interconnections between global political power and the world economic system. This awareness enriches our comprehension of the structural shaping processes of global trade and the establishment of economic globalization and regional trade systems, enabling a realistic understanding of the transfer of economic power and the power struggles among states in international politics.
1. The International Transfer of Power and the Struggle for Global Leadership
As the structural transfer of international power unfolds further, the world political landscape will undergo increasingly complex and profound changes, with various nations and major power relations facing transformation to varying degrees. In 1958, Kenneth Organski, a political science professor at the University of Michigan, first proposed the "Power Transition Theory" in his work, "World Politics." Organski posited that the ebb and flow of national power lead to dynamic changes in the international system. The "dominant nations" and "rising nations" are the main constituents of the international system, with their mutual powers shaping the transitions within that system. In reality, Western nations, particularly the United States, play the role of "dominant nations," whereas emerging powers like China and Brazil represent "rising nations." As global issues proliferate, the interests of these great powers become more intertwined, and the chaos in international political power results in frictions within the global economic structure, ultimately impacting the global trade landscape.
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Adjustments in global economic structure and the pressures from power conflicts are evident. The current state of the world economy is marred by sluggish global trade growth, fiscal deficits, high unemployment rates, an aging population, and climate change. First, internal contradictions among Western nations regarding their global influence, development models, climate energy policies, and financial systems reform will lead to increasingly complicated interactions between the U.S. and European nations with emerging powers like China. Second, consensus is hard to achieve among emerging powers regarding the distribution of influence and leadership opportunities extended by developed countries to developing countries. Emerging powers will play a role in the future political structure of a multipolar world. Influenced by economic protectionism and political populism, the U.S. sees its fiscal deficit expand and applies sanctions through the dollar-centered SWIFT system in global economic activities, strengthening the resolve of many significant economies to reduce their dependency on the dollar.
Reforms in the WTO's multilateral trade governance mechanism face numerous challenges. The rules and institutions of multilateral trade governance lag behind the actual needs of global trade development, especially as financial technology and digital currency reshape transaction forms. Firstly, the U.S. has initiated its trade protectionism. Based on its industrial structure adjustments and realist interests, the U.S. has adopted its own model of industry protection and "ally trade," allowing trade market disengagement under its value-based alliances. Secondly, the WTO reform mechanisms have become stalled. Developed nations, emerging powers, and developing countries are mired in a complex game, lacking feasible interest distribution plans for comprehensive economic issues. Various fragmented regional trade agreements, such as CPTPP, TTIP, and RCEP, have arisen, resulting in a multidimensional and overlapping international trade relationship. Thirdly, values-based trade has become a practical choice. World trade has shifted from benefiting all parties through global trade's "comparative advantage" to fostering regional trade among "good friends," creating cross-border trade among nearby nations with similar conditions and intertwined cultures, thereby weakening political will and action for improving global trade governance.
The trend of de-dollarization in international reserve currencies is increasingly evident. The dollar remains the world's most crucial reserve and payment currency, dominating international trade, finance, investment, and lending. However, its status has been challenged on multiple fronts in recent years. To address domestic inflation crises, the U.S. government has undertaken massive fiscal stimulus and monetary easing, leading to a surplus of dollars and a spike in inflation. Additionally, the proportions of the euro and renminbi in global currency payments have increased. Some countries have conducted trade through currency swaps or commodity exchanges to bypass the SWIFT payment system. For instance, trade between China and Brazil might use local currency settlements, while oil transactions between China and Iran or China and the UAE may utilize renminbi or local currencies, profoundly impacting the choice of currencies in international trade settlements. The diversification of foreign exchange reserves and the increased willingness to augment gold reserves among countries is also becoming increasingly apparent. The status of international currency is determined by the values it can provide within international services, while the rise and popularization of digital and cryptocurrency seek to alter the cross-border service logic of traditional currencies, establishing new rules for the sovereign currency cross-border settlement in the digital currency era. The decentralization of international currency is transforming the payment methods and structures of global finance.
The competitive future of the U.S. and China is characterized by simultaneous development. The foundation of U.S. hegemony lies in its international power order and global trade order. This structural power order stems from its highly developed financial market system, open domestic commodity market, high-level technological innovation system, a broad network of alliances or non-alliances, and a global military presence. GDP size and international cultural influence constitute only part of its comprehensive strength. In terms of global strategy, the U.S. aims to replace "multipolarity" with a "multipartner" approach, establishing a "partner world" under American leadership. This strategy involves strengthening ties with U.S.-Europe and U.S.-Japan alliances while simultaneously nurturing the U.S.-China partnership, creating an indispensable "global management axis" that aims to establish a global system benefiting both parties. Political scientist Joseph Nye posits that power transition trends since the 21st century can be categorized into two broad types. Firstly, the transfer of power among nations reflects a shift from the West to the East; secondly, power transitions are occurring from state levels to non-state levels.
The transfer of power among nations exhibits a pattern of orderly competition and cooperation. Developed economies like the U.S. and Europe, as well as emerging market nations, face developmental pressures related to internal economic restructuring and industrial transformation, leading to insufficient growth momentum. Both the "dominant nation" (the U.S.) and "rising nations" (such as China) will adopt multiparty linkages and mutual restraint as preconditions for game dynamics in a peaceful context, ultimately forging a new world economic system that aligns with the requisites of multilateralism and strives for win-win cooperation. In the coming decade, China and the U.S. will encounter more complex competitions over global and Asia-Pacific affairs, climate change, energy, finance, trade, and other matters, significantly influencing bilateral and multilateral relations involving the U.S., China, Japan, Europe, Russia, and India.
2. Reforming the World Economic System and Adjusting Trade Patterns
The areas governed and regulated by the global economic governance system primarily include international trade, international investment, and international finance, which are all forms of cross-border economic activity; thus, the manifestations of conflicts are mainly concentrated in global monetary finance and international trade and investment.
The construction of the world economic system addresses economic issues pertinent to specific historical periods. Firstly, three main components of the world economic system must be outlined. The establishment of the Bretton Woods system largely resolved the chaos, turmoil, and small-group dynamics of the pre-World War II international monetary system. The establishment of fixed exchange rates, along with the International Monetary Fund's adjustments for financial stability and the World Bank's assistance to underdeveloped economies, significantly contributed to economic stability and development. The General Agreement on Tariffs and Trade (GATT) played a pivotal role by conducting eight rounds of global multilateral trade negotiations, effectively reducing tariff levels worldwide and minimizing non-tariff barriers, thereby promoting the development of free trade. Furthermore, the inadequacies of the world economic system must be expounded. The construction of the global trade system and the international order has been primarily based on the interests of Western nations, with early participants in designing the world economic system enjoying a "chain master" position in global value chains and possessing certain exclusive rights, which is obviously unfair to developing nations. Promoting reforms in the world economic system necessitates a focus on relative equality in international trade order, adjusting the objectives of the economic governance system, organizational structures, trade and investment rules, and decision-making power allocation to ultimately achieve a multipolar reform of the world economic system.
Reforming the power dynamics affecting the global monetary finance system. The contradictions within the global economic governance system are primarily manifested in the imbalance of power, responsibilities, and interests within the monetary finance system. The dollar occupies the singular central position in global currencies. The dollar's status as a world currency arises from its binding with a fixed gold exchange ratio, which has perpetuated its monetary authority. Issues with the dollar include that, despite being the world's primary international currency and the Federal Reserve’s status as the global currency supplier, the abuse of currency creation has become an international extraction model, with trade seigniorage being collected. With the U.S. economy highly financialized, the logic of U.S. global control has long shifted from the "creditor logic" of the Bretton Woods era to the "debtor logic" of today, relying on the dollar system to control the scale and direction of global capital flows, which has become the core interest of U.S. hegemony. Reforming the global economic governance system requires the restructuring of the mechanisms that make the dollar the sole international currency under the international monetary finance system. The direction of dollar reform should include enhancing international constraints on dollar and U.S. monetary policy, as well as designing supervisory mechanisms for dollar issuance in existing international financial governance institutions such as the IMF, World Bank, and G20.
Addressing structural deficiencies in the multilateral trade governance system. In the transformation of international trade patterns, mechanisms governing international trade and investment represent the weakest link in the global economic governance system. The contradictions in the global economic governance system are primarily manifested in structural deficiencies within the overarching multilateral trade governance system represented by the World Trade Organization (WTO), which has become dysfunctional and failed to effectively undertake its responsibilities for promoting trade development and liberalization in the face of new circumstances. Reform must begin from the foundational structures and design of the rules governing the WTO, negotiations, and dispute resolution, dismantling any individual nation's direct rights to influence outcomes in trade disputes due to ineffective governance mechanisms. Reforms involving WTO negotiation processes, outlining reform principles, and seeking common ground while allowing for differences among major economies are necessary to build future global trade and investment rules.
The rules of the two major international financial institutions, the International Monetary Fund (IMF) and the World Bank, must be redesigned. At their inception, both institutions operated under rules, functions, and decision authority (shares and voting rights) that were predominantly controlled by developed nations. The U.S. has traditionally held the presidency of the World Bank, while European powers have appointed the IMF's presidency, becoming an unspoken arrangement. Within the multilateral trading framework, the GATT's leadership selection, organizational arrangements for trade negotiations, and agenda setting have consistently been dominated by major Western nations. When GATT upgraded to the WTO in 1995, it incorporated issues such as service trade, intellectual property rights, and dispute resolution into the WTO's core themes, reflecting primarily the interests and will of developed countries.
Post-war industrial structure adjustments, shifts in economic power, and increasing political influence have enabled emerging nations to actively shape a new economic governance structure. Economic integration at regional and sub-regional levels is expected to accelerate further, with the EU, North American Free Trade Agreement (NAFTA), East Asian Community, African Union, and Union of South American Nations (UNASUR) achieving notable progress. These developments reflect the inevitable push for internal reform under the influence of world power dynamics on the international economic system. The trend of equilibrium in global economic structures is becoming clearer, producing fragmented and multipolar characteristics, which represent external displays of the new global economic landscape. The dollar's status as the world's central currency is diminishing, and international currencies may gradually diversify, with the roles of the euro, renminbi, and ruble as regional currencies potentially increasing as the financial economy returns to the real economy—an orderly transition in the global economic landscape's financial payment systems.
3. The Restructuring of International Power Orders and National Economic Competition
The global economic governance system has entered a pivotal phase of reconstruction, necessitating the rebuilding of the international power order and restarting negotiations on economic interests between hegemonic and emerging nations. Once rising nations accumulate sufficient national strength and grow stronger, they often express dissatisfaction with the current state of the international landscape and the dominant countries' power distribution systems, prompting them to urge the initiation of processes that shift power to their favor to alter their international standing.
The U.S. maintains advantages in the international capital markets, trade patterns, technological leadership, industrial systems, and military competition. The comprehensive strength formed by such advantages underscores a robust structural power order centered around the U.S., which exerts structural control over the global landscape. The adjustment of the international power order does not imply an absolute decline in U.S. power but suggests a relative stabilization or equilibrium among major powers and their groups as they navigate competition and cooperation, leading to structural adjustments in the international system. Hegemonic nations remain acutely sensitive to threats against their status, harboring a heightened sense of crisis. Countries like the U.S. and other Western powers have adopted pragmatic approaches and double standards in cross-regional trade through measures such as "carbon taxes" and "technological barriers." In the emerging power order's negotiation process, responsible nations like China propose reform plans in the face of unfair international rules.
The contest of international power orders highlights how the formulation and revision of international systems inevitably reflect the values and interests of the dominant countries. However, as global governance institutions, these same systems must reflect the collective expectations and universal principles of the international community. There are various ways to acquire power; national comprehensive strength shapes international power and establishes a nation's standing in global society. Great power hegemony inherently signifies a social contract's recognition and commitment within the international order. The current framework, centered around the United Nations and encompassing institutions such as the WTO, IMF, and World Bank, has configured the model of global economic governance and negotiation. The competition within international power orders presents itself in diverse forms of "national alliances," as countries pursue their interests through coalition-building. The U.S., China, the UK, France, Germany, Japan, India, and Russia all seek reforms in voting rights and personnel appointments within their organizations based on national interests and alliance relations. Japan and Germany demand political power commensurate with their economic stature, while the U.S., UK, France, Canada, Australia, and others seek to create regional trade circles based on shared values. There are even order conflicts between the U.S. and the EU, where the U.S. wishes to foster a transatlantic partnership led by itself, while France and other EU nations emphasize building an equal partnership aligned with European interests. The U.S., in tandem with India and other nations, has proposed the so-called Indo-Pacific strategy, implementing "Indo-Pacific rebalancing" to strategically constrain China. Developing nations and smaller countries are establishing regional economic alliances and customs unions, reinforcing trade orders like the African Union and ASEAN.
World trade order conflicts are reflected in the frequent trade disputes occurring globally, showcasing the ceiling of trade growth and the reality of industrialized countries entering an era of stock limitations. Since the establishment of the global market, complex industrial collaboration systems and distribution patterns have been successfully built globally through international trade and cross-border division of labor. Major continents have shared advanced production materials, capital, and technological elements from developed countries, establishing industrialization models that align with their national endowments. This new industrialization process worldwide has overturned the established destinies of backward countries and regions characterized as "commodity markets and raw material sources." Emerging industrialized nations like China, Brazil, India, South Africa, and Russia are building independent industrial systems and fostering domestic markets, seeking to divide and dominate neighboring consumption markets. Consequently, traditional Western industrialized countries like the U.S. are experiencing a contraction in their economic hinterlands, leading to a shift from real to virtual industries, leveraging finance and technological advancements to transition into producing high-value commodities.
The contest for markets between new and old industrial countries is significant. A singular industrial structure fails to meet the sufficient domestic employment needs of developed Western nations; the disjunction between industrial production and consumer goods has directly fueled domestic inflation, making the repatriation of overseas manufacturing and the push for trade protection unavoidable decisions. Emerging nations, in establishing new production lines, require the initial capital accumulation of capitalist production modes but are hindered by insufficient decision-making power within the international trade order and stringent, high-standard trade liberalization rules that raise barriers for emerging economies and developing countries to access international markets. China has initiated the establishment of institutions like the Asian Infrastructure Investment Bank, the Silk Road Fund, and the New Development Bank of BRICS, addressing infrastructure construction for the "global south" and impacting existing international economic organizations such as the WTO, IMF, and World Bank under the outdated economic order.
The global power structure is increasingly multipolar. Mechanisms for addressing global issues are continuously optimized and restructured, with power dynamics becoming more networked, diversified, and institutionalized, presenting a complex and chaotic landscape. At the global level, mechanisms promoting major power cooperation and addressing global challenges are being strengthened. The United Nations will continue to play a crucial role in global coordination, with potential progress in Security Council reforms and further functional transitions; the G20 mechanism is solidifying and enhancing its role in global economic governance. The BRICS nations will explore practical cooperation and institutional development; the functions of the IMF and World Bank will be further adjusted, increasing the influence of emerging economies. Furthermore, the Financial Stability Board will enhance regulatory oversight of credit rating agencies and derivatives; specialized organizations such as the World Health Organization and the Food and Agriculture Organization will further strengthen their roles.
The international configuration serves as the foundation of the world order, which in turn profoundly influences the international configuration; both elements complement each other. It has become a dominant value in the new era for traditional great powers, developing great powers, middle powers, and smaller nations to engage in joint consultation, construction, and sharing. The negotiation of new institutional frameworks among state groups representing diverse power structures and the cooperative governance among great powers will be vital in resolving conflicts within trade orders. The theories of offensive realism proposed by scholars like John Mearsheimer suggesting that power shifts among states are "destined for conflict" may also be adopted by disputing states and require a nuanced understanding of war as a means of conflict resolution.
4. The Rise of Emerging Powers and Non-State Organizations in Developing Nations
Developing countries and emerging economies, as newly ascendent forces, are actively reshaping the global geopolitical landscape. In the context of crisis and governance, international mechanisms are undergoing transformations, leading to a diversification of power competition and participation. Emerging powers are initiating the reconstruction of international power and economic orders, while international organizations influence the global trade system and the dynamics of inter-state power rivalries. In this new paradigm, the competition for dominion over global governance and the formulation of international rules among major powers is increasingly intense. Many parties are pursuing transparency in trade dispute mechanisms regarding the relationships between great powers in international politics and security fields and advocating for fairness in global economic and social development issues, aiming to drive reforms in the main international economic governance institutions.
The group of emerging powers follows the "BRICS mechanism." In the pursuit of implementing the "BRICS Partnership for Economic Cooperation 2025" and establishing new industrial revolution partnerships, Brazil, Russia, India, China, and South Africa engage extensively in collaborative efforts in fields like economic and trade investment, infrastructure, finance, energy, green low-carbon initiatives, digital economy, food security, and supply chain cooperation from both national and local perspectives, driving continuous expansion in trade and investment between themselves. Middle-ranking emerging powers including Singapore, New Zealand, Switzerland, Australia, Turkey, Ecuador (representing Latin American nations), Mexico, Uruguay, and South Korea, backed by the "Group of 77," are gradually consolidating considerable strength. However, emerging states experience communication barriers from ethnic independence and religious cultural conflicts, necessitating a better integration of maximal benefit demands from nation groups across diverse ethnic, religious, and cultural backgrounds based on equal grounds in negotiations.
The European Union has entered a phase of "strategic autonomy." Since 2022, the EU has pursued a realistic path towards achieving strategic autonomy, enhancing its capacity for independent action in strategically significant policy areas without reliance on other nations. Within its balance of power structure, France and Germany effectively monopolize the discourse. France, as one of the five permanent members of the UN Security Council, holds significant interests in Africa, while Germany currently accounts for 24.7% of the EU's GDP, referred to as the "locomotive of the EU." The evolving international environment has sparked a comprehensive sense of crisis within the EU, leading them to resist being perceived as a subordinate to the U.S. With aspirations to bolster European defense mechanisms while pursuing energy autonomy, the EU aims for a diversified energy import strategy and increased use of renewable resources to reduce dependency on Russia. It is committed to ensuring economic, technological, and supply chain independence while safeguarding its strategic industries, encouraging the digital and green economic transitions among member states, and seeking diversified supply chain dynamics to lessen reliance on the U.S. and China.
Japan's transition from "soft" to "hard" power reflects its departure from an economics-driven foreign aid model. As a post-World War II nation, Japan has historically pursued a policy of "economic diplomacy." The aid diplomacy primarily facilitated through government-developed assistance yielded significant returns. Japan initially gained a foothold in Southeast Asia through war reparations and subsequently opened markets quickly using government aid strategies, transforming from "reparations diplomacy" to "aid diplomacy." Prior to the Asian Financial Crisis, Japan leveraged the "flying geese model" to influence the Asian economy and strengthened political relations with Southeast Asian nations. Economic power has propelled Japan's ambitions for political stature as it seeks to become a permanent member of the UN Security Council. To achieve this, Japan has fortified its security alliance with the U.S., deploying peacekeeping troops to conflict zones to enhance its role in international affairs. Japan is navigating a transition from economic soft power to political and military hard power, showcasing its ambitions for political prominence.
The influence of non-state organizations is on the rise. Strengthened cooperation trends are observed between state and non-state actors, where international organizations provide a conducive space for negotiation and dialogue while simultaneously acquiring aspects of national economic sovereignty. An increasing number of sovereign states have turned to negotiation and dialogue as means to resolve conflicts, leading to the emergence of new international organizations. The lower barriers to entry and management costs, along with advancements in the internet, are propelling the growth of non-governmental organizations. In the realm of global economic governance practice, entities such as the United Nations, World Bank, and IMF share similar participants but function distinctly, with the UN Security Council, IMF, World Bank, WTO, and WHO safeguarding fairness and effectiveness in global order across various affairs and specialized domains. The G20 has supplanted the G7 as the primary platform for international economic collaboration and coordination, facilitating non-organizational mechanism roles. Regional and multilateral trade systems like USMCA, RCEP, and CPTPP, as well as agreements such as the OECD Multilateral Investment Agreement, are pivotal in negotiating processes. Regional organizations like the EU, ASEAN, and the African Union can play increasingly effective roles in regional orders. Models of inter-state meetings among emerging market countries, such as the "Belt and Road" Forum, ASEAN Summit, and BRICS Summit, represent innovations in negotiation mechanisms. A plethora of formal and informal mechanisms created by diverse non-state actors serve as significant platforms for negotiating international political power and economic interests, aiding in the reshaping of the world trade system. This framework contributes to a balanced relationship between traditional great powers and emerging nations, fostering coordinated competition and cooperative governance, which profoundly impacts the reconfiguration of international economic and trade rules.
5. Conclusion
As the tides of globalization ebb and flow, the connotations of global structural power are being redefined. In the context of rapidly evolving global structural power, analyzing the logic of its evolution and interpreting how global value chains expand structural power theories are essential. Researching the dynamics of world political power and trade system construction enables a clear understanding of the great power competition and accurately positions China within the world power structure while reshaping the system for future global power politics. Joshua S. Goldstein notes that in many instances, emerging nations are willing to support and collaborate with hegemonic powers, suggesting that a "Thucydides Trap" between them can be avoided.
The "14th Five-Year Plan" period is a pivotal time for reforms and construction in the global economic governance system. China aims to establish a fairer and more just new order in international economics, actively participating in reforms and building the global economic governance system, enhancing its institutional voice in global economic governance, and undertaking international responsibilities commensurate with its status. This will foster cooperative relationships centered around winning outcomes and contribute to the creation of a harmonious international environment beneficial for China's development, ultimately promoting sustainable global economic prosperity.
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