The world trade comeback
Globalisation is not dead. Some commentators believe that the slowdown in the growth of world trade marks the end of globalisation. But ING’s head of International Trade Research, Raoul Leering, comes to a different conclusion in a new research report. He forecasts a rebound of world trade.
'The world trade comeback', a new report by ING, dismisses the suggestions that the slowdown in global trading is signaling the end of globalisation. While it is unlikely that growth will return to the elevated levels experienced in the 15 years prior to the collapse, the report does forecast a rebound. It identifies why the slowdown in trade post-financial crisis will not be permanent, despite languishing in recent years.
Historically, the average annual growth rate of world trade in volume terms has been 5.7% since 1970 and only 3.3% since 2012. More importantly, world trade growth no longer outpaces growth in world GDP. During the fifteen years leading up to the crisis, growth of world trade grew 1.9 times faster than world GDP growth. The study notes that the average ratio of world trade growth to GDP growth during this period was 1.7 times, before reaching almost 2.0 during the 15 years prior to the financial crisis, when structural changes, such as greater integration of the EU and the opening up of Chinese markets took place.
“We believe part of this slowdown is temporary and that trade growth will return to outpace GDP growth, albeit at lower levels than in the 15 years prior to the financial crisis of 2008” says Raoul Leering. “There is still plenty of potential for further integration of big emerging markets, such as China, India and the Philippines into the global economy. The big bang that happened in the 1990s and 2000s isn’t going to be repeated, but economic integration is far from over.”
The report also highlights that:
• Europe’s overrepresentation of 33% in world trade to its 25% share of world GDP has an amplifying effect when the region experiences significant decline or growth in imports. While the world economy showed an average growth rate of 3.3% during 2009-2014, the GDP of the EU grew only 0.1% per year. Now that the EU is recovering, this amplifying effect will drive up growth of world trade disproportionately.
• Offshoring is still a significant driver of trade, still dominating reshoring.
• Protectionist measures have had a minor impact on the slowdown of world trade and measures, like the implementation of the WTO Bali trade agreement of 2013, which represents a huge achievement in augmenting multilateral trade.
• Innovations like 3-D printing and robotics have thus far had a negligible impact on world trade growth. These technologies will have a negative effect on trade in the long run but in the short to medium term the downward pressures will be small.
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