This is the Cato Daily Podcast for Tuesday, September 16, 2008.

I'm Caleb Brown.

Free Trade isn't just about trade across borders, it's about trade within borders and countries that liberalize

trade must also liberalize their internal economies to reap the full benefits.

So says Raisin Sally, the director of the European Center for International Political Economy

and author of the new Cato book, New Frontiers in Free Trade.

He argues that the rising Asian role in global trade shouldn't be allowed to

foment an inward-looking defeatist attitude in the United States.

The United States became a great global power in the 20th century.

Relatively speaking, it will not be as great a power in the 21st century.

Describe what that means in terms of trade.

I think there's a relative issue here and an absolute issue.

Well, let's start with the absolute issue. Yes, inevitably the United States is going to have a declining share of overall trade and investment in the world, particularly with the rise of key emerging powers.

China at the head of the list.

But in absolute terms, the US economy is much more penetrated by the global economy than it ever was and that is set to continue.

So on the ground for producers and consumers across the United States, the world economy is going to matter ever more.

With its benefits, but also with all its challenges including having to adapt.

On the relative issue I think the challenge is to recreate enlightened US leadership of the system.

Now that is going to be a bigger challenge than

before. Farid Zakaria talks about that in his post-American world. I think it's the

wrong label because the world is still very far from being post-American.

But the challenge for the United States as the leader of the system is to, from the center as it were,

...