up for the decline in tariffs. But again the Uruguay Round slowed or reversed this, helping to reduce quotas, subsidies, and voluntary export restraints across a wide range of industries and to convert these barriers into more transparent tariffs (WTO 1996:32).
For most of the postwar period, less developed countries (LDCs) have used
trade barriers extensively, many for the explicit purpose of import-substituting industrialization (ISI). But beginning in the 1980s especially, many develop- ing countries began to liberalize trade and to adopt export-oriented policies [International Monetary Fund (IMF) 1992]. The conclusion of the Uruguay Round promoted this by reducing trade barriers in many areas of key interest to the LDCs, such as textiles and agriculture; it also brought many new develop- ing countries into the international trade organization, the WTO, inducing them to follow its rules. In addition, the transition from communist economies to market-based ones by many countries in the early 1990s further accelerated the trend toward global trade liberalization. All of these changes have resulted in one striking fact about the period since 1980: There has been a far-reaching liberalization of trade barriers across the globe (WTO 1996, Rodrik 1994). Why has this occurred? And will it last?
Concomitantly and in part consequentially, the growth of world trade has surged. For most of the postwar period, the growth of trade has outpaced growth in world output. Also important are changes in the nature of global trade. There has been tremendous growth in intra-industry trade and in in- trafirm trade. Intra-industry trade, which involves the exchange of goods from within the same industry, say Toyotas for BMWs, now accounts for between
55% and 75% of trade in advanced industrial countries (Greenaway & Milner
1986:Table 5-3); for the United States, this figure was 83% in 1990 (Bergsten
& Noland 1993:66). Intrafirm trade, which involves transfers of goods within one company across national boundaries, has also grown; it now accounts for over 40% of total US imports and 30% of US exports (Encarnation 1992:28). These two types of trade are important because they tend to have different ef- fects than standard, interindustry trade. Generally, they are associated with fewer displacement effects and less conflict. As Lipson (1982:453) argues, “intra-industry trade provides a powerful new source of multilateral interest in the liberal trade regime: diminished adjustment costs in some sectors, and higher net gains from trade as a result.” Finally, there has been a significant re- gionalization of trade. Intraregional trade flows within the European Union, East Asia, North America, and Latin America especially have become more important as a share of total trade. This is partially a result of the regional inte- gration agreements signed by these countries in the past two decades—e.g. the single market in Europe, the North American Free Trade Agreement (NAFTA), the Association of South East Asian Nations (ASEAN), the Asia Pacific Economic Cooperation (APEC), and Mercosur (WTO 1996:17–22).