The Democrats' bitter opposition was in part caused by a move away from the sensible Clinton moderation of the 1990s, a time when they voted overwhelmingly in support of North American Free Trade Agreement, which includes Mexico, Canada and the US. But the party's opposition this time was mainly motivated by a desire to defeat President Bush, whom they loathe, believing that they could make him a lame-duck president by striking down a trade deal in which he invested a lot of credibility.

Mistaken thinking from opposition parties has also found its way to Britain. A bunch of traditionalists in Britain's Conservative Party, known as the Cornerstone Group, say that their party has overdosed on liberalism, including apparently the economic variety. The group's leader, Edward Leigh, the MP for Gainsborough, refers seemingly with approval in a new pamphlet to Joseph Stiglitz, the former World Bank economist who is a prominent opponent of liberal economic policies. Leigh says that "free trade is not fair trade" and makes many other erroneous statements about economic policy and globalisation.

Fortunately, his neo-mercantilist views are not official party policy; the Tories are in enough trouble already and the last thing they need is to turn their back on economic freedom and to embrace instead economically illiterate views on protectionism. Leigh's ideas are certainly not accepted by the Blair government either; but despite the protests of opposition parties, free trade is on the rise again. President Bush regards such agreements as good not just for the American economy but as an integral part of promoting peace and fighting terrorism around the world.

The work of the Make Poverty History campaign in Britain, however misguided, has at least highlighted the case for abandoning agricultural protectionism. The campaign addresses a key problem for economists: how to deal with special interests. Europe's Common Agricultural Policy (CAP) benefits a small minority of the population in a big way, while its costs are little noticed because they are spread throughout society. Generating public outrage against the CAP has been something of an achievement. This is combined with the fact that some large beneficiaries of the CAP, such as Nestle, have also recognised that European Union (EU) protectionism is nevertheless hurting their bottom line.

British Prime Minister Tony Blair's response has been to go on the offensive, noisily speaking out against agricultural subsidies and arguing that they are preventing the EU from progressing economically. Whether he means it is another question; and he will probably fail to achieve anything, such is the opposition of countries such as France. But at least this raises the possibility of unilateral movement on agricultural subsidies regardless of future progress at the World Trade Organisation (WTO).

Asian countries are pushing ahead with their own trade deals. India and China want a bilateral trade agreement to increase trade between them to $30bn (£16.8bn, E24.6bn) a year by 2010. Independently, both countries are pushing for a trade deal between the 12 member nations of the Association of South East Asian Nations, creating a pan-Asia common market of 3bn consumers, almost half the world's population. India and the members of the Gulf Co-operation Council are discussing a possible deal, and New Zealand and Malaysia want implementation of deal by next year.

The increased prominence of bilateral trade agreements is in part caused by the lack of progress at the WTO. Razeen Sally, head of the International Trade Policy Unit at the London School of Economics, says that the Doha round of trade negotiations, which are supposed to end in December, will take another couple of years and perhaps even more.

The WTO's outgoing director-general Supachai Panitchpakdi has said he is disappointed with how negotiations have been progressing: "Some countries have not moved in the way they were supposed to be moving. People have thought that if one area is not making headway they will not make a contribution in other areas. These linkages are not helpful. A reluctance to make deals has been the main blockage."

The reality is that the WTO is not an effective forum for reaching agreements. Hyperinflation of the membership, combined with one-member, one-veto voting, means that success in December is unlikely. Where the WTO is proving effective is in settling disputes between trading blocs. The EU's defeat last week at the WTO was symbolic of how old-school protectionism is being thwarted. Brussels had wanted to increase tariffs on Latin American bananas from E75 a ton to E230 from the start of 2006 to help producers from African, Caribbean and Pacific countries. The WTO rightly ruled against the measure saying that the tariff would breach an agreement made by the EU to "maintain total market access".

Nations wanting more liberal trade will increasingly turn to agreements outside the WTO to make progress. Supporters of the multilateral agreements made at the WTO point complain that bilateral agreements are often messy and discriminate against countries not party to the agreements. This is a fair criticism, but countries have to make the choice between a perfect agreement that is not on the table and a bilateral one which, though impure, does at least make some progress.

We will also see an increase in unilateral liberalisation of trade. It is a little-known fact that two thirds of trade liberalisation by developing countries since the 1980s has been unilateral, rather than conducted through multilateral or bilateral agreements with other countries. Today, China and India are not waiting for the rest of the world and have been opening up and tearing down trade barriers unilaterally. This has been a big contributor to their extremely high levels of economic growth. Their unilateral approach to trade, like Britain's 19th century free trade, will turn up the pressure on developed countries. America and Europe especially will need to push forward with free trade, knowing that the rest of the world is snapping at their heels.

The rise of the developing countries will shatter the idea held by many in Old Europe, especially in France, that they can ignore globalisation and insulate their economies from supposed threats.

The Central American Free Trade Agreement is just at the beginning of a century of trade liberalisation, more significant and powerful than any previous wave of liberalisation. Europe (and Britain) can either choose to follow the path of America, Asia and China, or it should prepare for a century of decline. If the EU is to avoid long-term economic stagnation, it has to welcome globalisation - not fight it.