Farewell to the Age of Free Trade

Since the end of World War II and the birth of the modern global economy, business leaders have come to accept an iron law: International trade always expands faster than economic growth. Between the late 1940s and 2013, that assumption held true. Trade grew roughly twice as fast as the world economy annually, as fresh markets opened up, governments signed free-trade pacts, new industries and consumers emerged, and technological advances made international trade cheaper and faster.

Now this iron law may be crumbling. Over the past two years, international trade has grown so slowly that it has fallen behind the growth of the world economy, which itself is hardly humming. Major potential trade deals, such as the proposed Transatlantic Trade and Investment Partnership between Europe and North America, are at risk of falling through.

Expectations that emerging markets could boom for decades haven’t come true.

And unlike at just about any time in the past six decades, the political leadership of almost every major economy is weak, making it easier for protectionism to flourish. The era of free trade as the world has known it is dangerously close to coming to an end.

An era of shrinking trade would be disastrous. The past 200 years show that trade makes the world economy more dynamic. It brings people from different countries together and links economies to each other, fostering interdependence. Restoring faith in free trade isn’t just an act of economic self-interest. It’s essential to building a more prosperous and peaceful world.

More From Bloomberg Businessweek: