Evolution of Trade Globalization from 2003 to 2014: Weakening Dynamics of World Trade Confirms Globalization Postulates

Abstract

This paper measures the globalization degree of physical trade flows based on WTO figures from 2003 to 2014. The paper is an annual update of former presented papers representing a long-term study analyzing the evolution of the globalization phenomenon. The entropy-based metrics used to compute the interweavement of trade flows is based on a Boltzmann derived concept of entropy, i.e., the higher the order (high inequality) the lower the entropy, leading to a new defined statistical entropy. Translated to economy: the higher the inequality (high concentration of flows) the lower the entropy, i.e., the lower the globalization degree resulting in a higher risk of the economic system. Former papers have shown that economic world trade, as a whole, has been globalizing during recent years but with different patterns: de-globalizing for advanced economic regions, such as North America and Europe, and globalizing for emerging economic regions. Furthermore, it shows that globalization or de-globalization, intended as interweavement of flows, is not a result of the absolute trade volume but of the growth rate of trade volume. The Globalization Trade Model with globalization type 1a of commodities, globalization type 1b of specialties, and opportunistic low-cost globalization type 1c gives an explanation for the different regional evolutions. At the beginning of economic development, globalization is governed by the H-O resource endowment trade logic complying with complementary needs of economic regions, spreading trade flows to new destinations, whereas advanced economies are concentrating on preferential destinations, following Linder’s trade model based on similar consumption patterns. However, after the financial crisis of 2008, during the last years, the evolution of world trade has been stagnating. Is the globalization of trade coming to an end? The aggregated result seems to confirm inverse Kuznets evolution of globalization, explainable with the Central Theorem of Globalization and the Maximizing-Value-Net-of-Risk globalization logic.