Policy Innovations The central address for a fairer globalization

A publication of the Carnegie Council

Economic Transformation and Multilateral Reform

By Ariel Buira

May 1, 2004

Abstract: Over the past half century the world economy has become increasingly interdependent. Developments in the economy of one country or region are transmitted to other countries through high levels of international trade and financial flows. This integration differs from the patterns of a century ago in that a growing number of multi-national firms have spread their production processes over a number of countries. As a result intra- firm trade and intraindustry trade have risen sharply as a proportion of international trade. Developments in information technology have erased distances and the integration of capital markets has proceeded to essentially create a single international capital market. The volume of financial transactions has grown exponentially and currently greatly exceeds the volume of flows in trade of goods and services. The close integration of the global economy presents new and difficult economic challenges.

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