A decades-old rule of thumb has it that trade grows faster than GDP, mainly as a result of globalisation. And yet, since the crisis-induced ‘Great Trade Collapse’ of 2008/2009, followed by a brisk but brief recovery in 2010, international trade has been growing roughly in line with world GDP. This pace is markedly slower than in the previous fifteen years, in which yearly trade growth at times even doubled global GDP growth (Figure 1). In addition, the last spell of data shows that trade might have slowed down even more during the first part of 2015.
Is this ‘Global Trade Slowdown’ a signal that globalisation has structurally ‘peaked’, and thus we should expect a stagnation of trade growth also in the future? Or is the slowdown just the result of cyclical drivers, e.g. the fragile European recovery and slower growth in China?
Figure 1: World GDP and exports in volumes – index 2008=100
Source: World Bank – World Development Indicators
The ongoing debate, summarized in a previous Bruegel’s blogpost, acknowledges the fact that, besides the well-known cyclical explanations, a more structural reason behind the trade slowdown might be associated to the role of Global Value Chains (GVCs), i.e. the break-up of production processes into ever-narrower discreet activities and tasks, combined with the international dispersion of these activities and tasks across countries.
Read More »