Last Friday (July 31), the World Trade Organization reported that global merchandise trade increased at a surprisingly vigorous annual rate of 3.2 percent during the first quarter of this year, despite widespread energy shortages caused by Middle East hostilities.

That indeed was a surprising result in view of pessimistic trade forecasts by official international organizations, amplified by financial markets and permanent threats of trade sanctions as instruments of foreign policy objectives.

But somehow lost in this reasoning is the fact that trade follows from economic growth and freedom of international business transactions.

The U.S. foreign trade in the first five months of this year increased 2.7 percent from the year earlier, even though its trade with the stagnating European Union – America’s by far the largest trade partner -- declined 11.5 percent.

In contrast, the U.S. trade with a strongly growing emerging and developing Asia rose 8 percent.

Impediments to trade, such as tariffs and non-tariff trade limitations have an even stronger negative impact on global flows of commerce and finance.

India is an example of that. The U.S. trade with India declined 4.3 percent during the first five months of this year, despite India’s growth rate remaining on a 7 percent growth path – an obvious result of political tensions with the U.S. and their negative influence on bilateral trade.

Southeast Asia’s leading role

China is a good example of how its political problems with the U.S. led to Beijing’s active trade diversification and a rapid retreat from erstwhile booming U.S. trades.

According to China’s statistics, there was no growth in U.S-China trade during the first half of this year. U.S. exports to China declined 0.8 percent and China’s exports to U.S. stagnated at a 0.2 percent growth rate.

Again, this was not a result of weak economic growth. During that period, China’s economy grew at an annual rate of 4.7 percent, and the U.S. economy was advancing at a rate of about 2 percent. The main culprit were tariffs, non-tariff barriers and expectations of political pressures.

But China’s total foreign trade soared 21 percent in the first half of this year, with exports and imports surging 18 percent and 27 percent, respectively. And Beijing’s trade with rapidly growing emerging and developing Asia rose a well-balanced 23 percent; exports and imports with that area increased 23 percent and 22 percent, respectively.

That brief review of recent events in global trade shows that there is a deepening trade fragmentation along the economic, political and security faultlines.

Trust is an economic variable

The U.S., E.U. and Canada constitute a well-integrated economic, political and security region; China, Brazil and India are leading the Global South, while Russia remains a dominant force in its Eurasian Economic Community (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia), with strengthening economic and political ties to Southeast Asia.

Current difficulties in the trans-Atlantic community are matters of adjustment of the world’s largest trading bloc acquiring a more coherent political and security dimensions, while the U.S. keeps reviewing its national interest and bonding within the Western Hemisphere.

For the time being, those are not structural problems, but important political changes within some larger E.U. and NATO members could lead to revisions of organizational and mission objectives. Whatever happens, Canada will seek closer economic and political ties with E.U.’s “middle-power” members.

China is the largest trade partner to its BRICS fellow member countries of Brazil, India, Russia and South Africa. And China is also the largest trade partner to the fellow members of the Shanghai Cooperation Organization (SCO). Trade within that large landmass and more than half of humanity will continue to flourish.

Beyond that, it is not clear how much further BRICS and SCO can go in their apparent intention to tighten their structure and create closer ties on economic, political and security issues because there are significant bilateral problems among some of its members.

The trans-Atlantic community is a more homogeneous entity with everything to remain a powerful player in global trade. And the fact that both the U.S. and the E.U. have great difficulties in coming to terms with strategic and systemic problems in their China relations should bring them closer in the years to come.

The optimal solution for the trans-Atlantic community would be to use its huge bargaining power in forging a peaceful modus vivendi with China.

And some things should be clear: Containing China is a fool’s errand, and so are ideas of breaking up a de facto Russia-China alliance. The MAD (Mutual Assured Destruction) doctrine is in force; there can be no skirmishes between nuclear armed adversaries. The AI linear extrapolations nonsense is a dangerous illusion.

China did not need the AI to become the world’s second-largest economy from an impoverished economy the size of the Netherlands in late 1970s. China also turned Macao, a sleepy Portuguese gambling outpost, into a vibrant economic and cultural city currently hosting an International Music Festival featuring grand opera, musical theatre, symphonic, choral and chamber music, pop, fusion and jazz events, with the participation of American, Asian and European ensembles.

At this writing, China’s high-level business delegation is visiting the U.S. to plead for fair trade along the lines of Trump-Xi talks in Beijing last May. That is an important follow-up mission to define the outcome of the U.S.-China summit in Washington next September.