Gene Kindberg-Hanlon and David Young.
The volume of world trade is now 17% below where it would be had it grown at pre-crisis trend after 2011. This post argues that most of this gap can be explained by weakness in world GDP, but stalling expansion in global value chains (GVCs) is playing an increasingly important role. We also argue that this shortfall can’t be explained by shifts in the geographical or the expenditure split of global GDP growth. While world trade grew twice as quickly as world GDP pre-crisis, it is likely to grow at about the same rate as world GDP in the future. This matters: weak trade could explain half of the 1pp fall in annual global productivity growth since the crisis.
