Hamish McRae: Free trade is not just about goods. It is also about money, services - and people

We bought some kitchen chairs in Castle Douglas, Kirkcudbrightshire, last weekend. They were oak, simple, solid and at £75 a pop, pretty reasonable. They had been made in China.

There is a strange mismatch in the world trade talks starting in Hong Hong, a disjunction between achievement and perception. On the one hand, world trade itself is more vibrant than ever before, growing year after year at double the rate of growth of the world economy. This has allowed the world's two most populous nations, China and India, to grow by 9 and 8 per cent this year, and their living standards to rise on average by a similar amount. So trade itself is a huge success story. We - and the Chinese carpenters who made those chairs - are directly benefiting from the opening up of world trade that has taken place over the past half-century.

On the other hand, the attacks on the World Trade Organisation, the body charged to oversee and police it, have seldom been louder. These attacks come from a vast spectrum of people who feel they, or those they would claim to represent, are disadvantaged by the growth of world trade. Yesterday it was the turn of the South Korean farming "activists" to try to disrupt the Hong Trade talks. The day before, the headlines had been taken by José Bové, the "radical" French farmer who had been excluded by the Hong Kong authorities.

There will doubtless be more protests as the talks continue because greater freedom of trade does create losers, at least in the short-term: producers who are undercut by foreign competition. The beneficiaries, be they consumers in Scotland or producers in China, are vastly larger in numbers, but they are more diffuse. Their voice is not heard.

But then they don't need to be. The march towards an ever-more-global economy seems secure. The scars of the protectionism of the 1930s are so deep - the collapse of world trade led to the rise of Hitler - that most of the world's economic leaders retain a broad commitment to greater trade liberalisation.

There may be wrinkles in that commitment, witness Peter Mandelson's support for the EU's common agricultural policy. But in the real world of politics there are always rough edges. The CAP is certainly one. The EU trade commissioner has to defend it. It is not helpful to attack him for supporting a policy that has been at the very core of the EU since the Treaty of Rome.

The more substantive matter is not the speed at which the rich world dismantles its agricultural subsidies, distorting, unfair and inefficient though they may be. Nor is it whether the world will slide back into greater protectionism, reversing the progress that has been made in successive rounds of trade talks, of which the present Hong Kong meeting is one more step. It is whether international trade restrictions will seriously inhibit the next burst of international trade, which we can see already is taking a rather different direction from the past.

Until recently, the main thrust of trade liberalisation was freedom of movement of goods. But the tariff barriers that hobbled world trade a generation ago have now been reduced to such a level that they barely exist. With the exception of restrictions on trade in food, trade in goods is now pretty free.

But trade has changed its nature. It used to be just the movement of things, but now it is also the movement of money, of services, and of people.

Money - international investment - has become much freer. The desire to attract foreign investment has led to the dropping of exchange controls at least for foreign residents in most developed countries. So the market is encouraging reform without the need for external political pressure.

To be sure, some countries restrict the entry of foreign companies, but in most cases those are countries where the foreign companies are none too eager to enter. And commercial pressures are forcing even the more reluctant countries to welcome inward investment, witness just this week Kuwait's invitation to foreign oil companies to return to help it develop its fields, after excluding them for a generation.

Services are a different matter. One of the astounding effects of the communications revolution has been the push it has given to international trade in services. There has never been a world where telecommunications have been so competent or so cheap. So any job that can be done on screen can be done just about anywhere in the world.

But if this has benefited Bangalore software houses to do business in Britain, the ability of British banks and insurance companies to do business in India has been somewhat restricted.

China has been an even harder market for financial service companies to enter, though self-interest is now encouraging the Chinese to invite more foreign participation.

One aim of this new trade round is to extend the sorts of freedoms that have been achieved in the movement of goods to the movement of services. This is the new direction in which globalisation is going. Talks about the trade in services is at the stage where the discussions over the trade in goods were in the 1960s. Greater freedom for trade in services is going to happen anyway, but the speed at which it will do so can be measurably helped by international agreement.

And freer trade in people? This is not on the agenda for these talks, but it is something that will I think become more and more important in the coming years.

Here in Britain the past year has seen the impact of a sudden liberalisation of movement in human capital, with the opening up of the UK labour market to the skills of the new EU members. Half the increase in labour in the UK has come from eastern Europe, while apparently Britain has created more jobs for Polish people than Poland. Both sides benefit enormously.

We do so because we get jobs done well. Poland benefits because its workforce acquires other skills, experience and capital. If large numbers of people move country, that can create social tensions, though in this instance there have been very few. On the other hand, freer labour markets will become a way of increasing global wealth, just as freer trade and capital markets have been.

To understand what is happening in Hong Kong - and why it does really matter - don't focus on the rows. If the world's poorest nations can gain better access to world markets that would be very helpful, for it is both absurd and immoral that they should be excluded to the extent they have been.

But the talks matter because they are part of a continuing process that has been going on for more than half a century to rid the world of the restrictions that wrecked the world economy in the first half of the last century. Trade is largely done; services and investment need to make progress; and eventually a wise world would think about people too.