Does the Global Trade Slowdown Matter?
26 Pages Posted: 16 May 2016 Last revised: 30 Apr 2018
Date Written: May 13, 2016
Since the Global Financial Crisis, world trade growth has been subdued and lagging slightly behind growth of gross domestic product. Trade is growing more slowly not only because growth of global gross domestic product is lower, but also because trade itself has become less responsive to gross domestic product. This paper reviews the reasons behind the changing trade-income relationship, and then investigates its consequences for economic growth. On the demand side, sluggish world import growth may adversely affect individual countries' economic growth, as it limits opportunities for their exports. On the supply side, slower trade may diminish the scope for productivity growth through increasing specialization and diffusion of technologies. The paper finds preliminary evidence that the changing trade-income relationship matters, although the quantifiable effects do not appear to be large.
Keywords: International Trade and Trade Rules, Economic Growth, Economic Theory & Research, Industrial Economics, Food & Beverage Industry, Plastics & Rubber Industry, General Manufacturing, Business Cycles and Stabilization Policies, Textiles, Apparel & Leather Industry, Pulp & Paper Industry, Common Carriers Industry, Construction Industry, Labor Markets, Transport and Trade Logistics
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