Members of WTO are agreeing to abide by the rules of WTO, and hence allowing WTO to monitor domestic laws and practices that may be in conflict with trade rules set by the WTO. Similarly, members of International Monetary Fund also allow the Fund’s surveillance of their exchange rate practices. Thus, increased trade is gained only through reduced national sovereignty. Gains from trade often forces member countries to sacrifice some national sovereignty.
Moreover, WTO is increasing its functional area beyond international trade in goods. Now it is expanding its area of influence to governs trade in services and foreign direct investment.
Also, IMF is monitoring exchange practices, and hence also encroaching national sovereinty of member nations. If customs unions and free trade areas disbanded altogether, WTO would become equivalent to one world government, except in the security issues.
United Nations has not evolved into an institution which solely determines war and security issues due to lack of will and slowness to act promptly.
Trading countries are mutually interlocked and their economies are so intertwined that it becomes increasingly difficult for one member country to wage war against others. Global peace can be guaranteed only after one world government is established much as the presence of the Federal government eliminates civil war in the United States. WTO, IMF and the United Nations may prove to be just stepping stones which lead to one world goverment that may be formed by the end of this century. Most likely, citizens of trading nations will speak one common international language and their own national languages.
Interest rate disparity between trading nations will gradually disappear by increased capital moibility. Among three factors of production, capital is most mobile and capital mobility alone will equalize interest rates between countries. Among relatively immobile factors, labor and land, there may be disparity in their respective factor prics. However, freer trade will equalize factor prices. World wide improvements in navigation skills and communication technologies have contributed to declining transport costs and trade barriers. Thus, despite differences in technologies, increased trade between the North and the South will shrink, even wipe out, any wage disparity between developing and developed economies, at least for unskilled and semi-skilled laborers. Wages of professionals may differ between countries, reflecting only the differences in human capital embodied in such professionals.
We should expect a gradual decline in the real wages of unskilled workers in developed economies (US, EU and Japan) and a gradual increase in the real wages in developing countries (China, India and Africa). The division between developing and developed economies will be blurred due to factor price equalization and increasing capital accumulation in developing areas.
Per capita income of the US is $41,800 in 2005. At the current rate of growth (3.5 percent), it is expected to quadruple before 2050. When per capita income is low, increases in income may raise consumption of all goods equiproportionately. However, as per capita income rises beyon a threshold, say about $150,000 per year, leisure becomes increasingly demanded more, and the work week will decline to four days, even three days a week. Before the end of the century, it may decline to two days a week. Making money becomes less and less important to typical consumers. The number of people depending on passive income from their investment gradually increases, and they spend much of their time to do volunteer work or public services, thereby greatly increasing social welfare.
Of course, this scenario is based on the premise that human race has exterminated some diseases caused by viruses. Life expectancy also increases due to less repetitive work. By the end of this century, much of the developed economies may show signs of Utopia.