Trade Slowdown Research Articles

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The paper examines the cyclical and structural changes in world trade that affect its development and dynamics. It is determined that each of the stages of development of international trade is characterized by certain factors and development trends; features that reflect the level of internationalization of production and the role of international trade in the development of national economies; priority methods of regulating foreign trade by most countries. The study of the dynamics of world trade since 1800, taking into account its general upward trend, has identified a certain cycle of its development, which at different times was caused by changes in the structure of productive forces, development of new technologies, actions and factors of political and military nature. The fluctuations obtained as a result of the study have different durations and reach the lowest points of fall and the highest points of growth of world trade at different intervals. The most stable in terms of frequency and amplitude of fluctuations in world trade are the periods from mid-1850 to the First World War and 1950-1974. The most critical is the period 1915-1938, for which cyclical fluctuations in world exports are characterized by the highest amplitude. Also, statistical analysis of the data allows to determine the cyclical development of the world economy and its synchronicity with the cyclical fluctuations of world trade with the definition of certain cycles equal to 15-18 years. The current stage is characterized by a slowdown in world export growth. In 2009, the decline in economic activity was the largest among all global recessions. The data show that trade is not even keeping pace with world production growth, and over the past eleven years its average rate has been 2.2% (with the exception of strong surges in 2010-2011) against 3.07% of world GDP growth. The lack of trade dynamism in the last ten years is explained by the weakness of aggregate demand, especially in the euro area. The slowdown in world trade is also linked to the completion of the integration of China and Central and Eastern Europe into the world trading system. The third explanation is the increasing appeal of countries around the world to protectionist measures in international trade in order to stabilize national economies. Many countries have temporarily abandoned normal trade conditions and opted for a more restrained format of mutual trade with other countries. Determining the prospects for the development of the world economy and international trade, WTO experts provide a range of forecast forecasts for 2020 - from 5% to 11% and from 8% to 20.4%, respectively.

Cyclical and Structural Aspects of the Recent Export Trends: Evidence from Korea

Purpose – This paper investigates the recent trade collapse, recovery, and prolonged slowdown to shed light on the discussions about whether the current slowdown is structural or cyclical. I examine structural, cyclical, and heterogeneous aspects of the recent trade trends using detailed statistics of a small open economy, South Korea, whose economic success and growth have been heavily dependent on exports. Design/methodology – I use both aggregated and disaggregated trade statistics of South Korea. I apply the following methodologies: 1) I decompose the trade growth into the extensive and the intensive margin and observe the effect of prices over time. 2) I estimate the trade-income elasticities focusing on the world’s import demand, separately for goods from the world and from Korea. 3) I compare the drop in goods exports in slowdown and trade collapse, which are the two unusual periods in the recent history when world trade has substantially dropped altogether. Findings – I show that while the last drop of trade after 2015 has cyclical aspects, there is evidence that the continued slowdown from 2012 is structural: 1) the so-called ‘China factor’ is found in the analysis of trade-income elasticity of the world and China for imports from Korea. 2) The bilateral trade barriers between Korea and its principal trading partners are universally tightening. 3) Firm sizes, destination countries, and the mode of transactions affect disaggregated trade flows during the slowdown periods. Originality/value – This paper contributes to the debate regarding whether the current trade slowdown is structural or cyclical. I provide two concrete evidence that the export drop in 2015 stems from low oil prices: one is the divergence of Korean export value index from its export quantity index, which started in late 2014 when oil prices plunged. I also contribute to the literature by providing evidence that Korea’s trade barriers with important trading partners are steadily increasing since 2012 as the protectionist measures toward Korea’s export products are steeply increasing after the global financial crisis.

Are global value chains receding? The jury is still out. Key findings from the analysis of deflated world trade in parts and components

The weakening of global value chain dynamics is considered as one of the causes of the slowdown in world trade since the 2008 crisis. To better understand the evolution of GVCs at the world level, we use very detailed trade data for 2000 to 2017, which distinguishes different production stages along the GVC. In particular, among intermediate goods, we focus on Parts and Components (P&C) rather than semi-finished products since the manufacture of P&C corresponds to activities more embedded in GVCs. We control for price effects using an original production stages deflator based on detailed bilateral trade unit-values, and take into account the evolution of the global business cycle. We show that the development of international value chains, measured as the share of trade in P&C in manufacturing world trade in volume, continued after the crisis. Moreover, such dynamics are not the result of sectoral composition effects.

Contemporary Contemplation on Integrated Global Financial Climate

Although the global economy nurtured at a noteworthy pace in 2018 (3.7 per cent according IMF and 2.9 per cent according to World Bank) on the back of a strong fiscal expansion in the USA and easy monetary policy by the central banks around the world, the risks to the stance for worldwide economy are tilted downwards on the concerns of monetary tightening cycle and slowdown in the global trade. IMF slashed its global growth outlook from 2019 to 2020 marginally lower to 3.5% and 3.6% respectively, mainly due to undesirable properties of tariff gallops ratified in the economies of US and Chinese, and lighter drive in Europe in the post-half yearly of 2018. Growths in the United States are likely to sluggish to 2.5 per cent in 2019 and 1.8 per cent in 2020 as we had compared from 2.9 per cent in 2018. Progression in the Euro area set to moderate from 1.8 per cent in 2018, 1.6 per cent in 2019 and 1.7 per cent in 2020. Japan’s economy set to disseminate by 1.1 per cent in 2019 and to 0.5 per cent in 2020.

The slowdown in trade: end of the “globalisation hype” and a return to normal?*

Trade liberalisation has been a significant driver of globalisation over the past half century, but global trade has slowed in recent years. This paper argues that globalisation can also be driven by higher commodity prices, as commodities constitute a large fraction of global trade. This is reflected in trade volumes and commodity prices, which increased until around 2014 but have fallen since. Commodity price-driven globalisation implies lower living standards in advanced countries, as the higher commodity prices diminish the purchasing power of workers. Based on a Krugman (Am Econ Rev 70(5): 950-959. 1980, J Polit Econ 89(5): 959-973 1981) type model we show that the relation between globalisation and the “emergence of China” follows a hump-shaped relationship. Moreover, we argue that the “globalization hype” should come to an end with an eye on global value chains and finance.

Made in the World Revisited

In the last decade, the concept of ‘global value chain’ (GVC) has become popular to describe the way firms fragment production into different stages located in different economies. The ‘made in the world’ narrative suggests that production today is global with inputs coming from all parts of the world before being assembled into final products also shipped all over the world. The empirical basis of this story has however been questioned. On the one hand, recent evidence indicates that there is some kind of ‘deglobalisation’ with a trade slowdown and lower levels of fragmentation of production. On the other hand, some authors suggest that supply chains are regional rather than global. In this paper, we offer a comprehensive review of the evidence based on the 2018 update of the OECD Trade in Value-Added (TiVA) database and indicators counting the number of domestic and foreign production stages, border crossings and geographic length of supply chains. The study covers 1995 to 2016. The made in the world narrative is correct when describing the rise of GVCs in the 2000s. But globalisation has reached a peak in 2012 and since then supply chains are becoming more domestic rather than more regional. The ‘erosion’ in globalisation (i.e. the reduction in the average length of supply chains since 2012) is 52 kilometres per year.

Import demand in heterogeneous panel data with cross-sectional dependence

ABSTRACTWe investigate the long-run income and price elasticity of import demand functions with a heterogeneous unbalanced panel of 34 countries over the period 1985:q1-2018:q3. To estimate world elasticities the model is tested with the activity variables derived from the theoretical and empirical literature: GDP, GDP minus exports, Private Demand, Aggregate Domestic Demand, National Cash Flow, and Import intensity-Adjusted Demand (IAD). First, we evaluate time series properties using second generation panel unit root and cointegration tests. Second, we rely on the dynamic common correlated effects mean groups (CCEMG) estimator to deal with cross-sectional dependence (CSD). We find that the IAD, whose world elasticity is close to one, is the best performing specification. Our results confirm that the most appropriate activity variable to assess import demand should encompass intermediate goods as suggested by the recent literature on global supply chains. Moreover, we partially solve the puzzle of the recent trade slowdown since, taking stock of the role of intermediates, the time needed to resort to the long run equilibrium in the aftermath of a global turmoil is greater than that predicted by previous studies.

Who's most exposed to the world trade slowdown?

▀ A new indicator of exposure to the world trade slowdown points to Asian economies like Taiwan and Korea being most exposed, but also to significant vulnerability in Germany. Better insulated from the slowdown are the less open economies, such as the US, Brazil and India. ▀ Asian economies’ exposure is greater due to their generally high export orientations and strong trade integration with China – especially significant given the escalation of US‐China trade tensions. Likewise, Germany is highly export‐oriented but is also specialised in capital goods exports, which tend to weaken most in trade downturns. ▀ The indicator used is based on factors including trade openness, export specialisation in weakening sectors and exposure to spillovers from US‐China tariffs. It explains around 40% of the pattern of economic slowdown from 2017–2019 across a sample of key economies.

World Economic Prospects Monthly

Overview: Global growth in 2019 revised down again ▀ In response to continued weakness in global trade and signs that the softness has spread to other sectors, we have cut our 2019 world GDP growth forecast to 2.5% from 2.7% last month (after 3.0% in 2018). But we see growth accelerating in H2 due to fiscal and monetary policy changes and as some temporary negative forces unwind. While revised fractionally lower, global growth is still expected to tick up to 2.7% in 2020 – but the risks lie to the downside. ▀ The latest tranche of trade data points to another poor quarter in Q1. While the weakness in Chinese trade is partly related to the impact of US tariffs, the causes of the trade slowdown are rather broader. Reflecting this, we have again lowered our world trade growth forecast – we now see it slowing from 4.8% in 2018 to just 2.5% in 2019, only a little above the previous low of about 2% in 2016. ▀ One source of comfort is that the February global services PMI rose to its highest level since November. But retail sales in the advanced economies as a whole have been weak recently and, while consumer confidence bounced in February, it has trended lower over recent months. Reflecting this, we have cut our global consumer spending forecast for this year. ▀ We expect ongoing policy loosening in China and dovish central banks – either in the form of delays to rate hikes and liquidity tightening or via renewed easing – to boost the global economy in H2 and beyond. Some recent temporary drags on growth (such as auto sector weakness) should also wane, providing further modest support. ▀ But the modest rise seen in GDP growth in 2020 exaggerates underlying dynamics due to sharp rebounds in a few crisis‐hit economies such as Turkey, Venezuela and Argentina. And downside risks for 2020 are probably larger than in 2019; benign financial conditions and the weaker US$ assumed in our baseline may not materialise, while the build‐up of debt in EMs could act as a larger‐than‐expected drag on growth.

World Economic Prospects Monthly

Overview: Global growth resilient to trade slowdown ▀ It seems increasingly clear that the manufacturing‐ and trade‐driven soft patch in late‐2018 is extending into this year. But we still think that global recession risks remain low and see no reason to make any notable shifts to our outlook for the global economy this year. We continue to forecast that GDP growth will slow from 3.0% in 2018 to 2.7% this year, with a similar outcome seen in 2020. ▀ Various indicators show that trade volumes slowed sharply at end‐2018 and survey indicators for January suggest that the situation has not improved since then (see Chart). The main reason for this weakness has been China, where imports ended the year on a very weak note and we expect a further slowdown in Q1. ▀ We have lowered our forecast of Chinese imports in 2019 by around 1.5pp in response. However, we expect a bounce back in Q2 and beyond; reflecting this, Chinese import growth over the year as whole is still expected to be notably stronger than in the 2015/16 soft patch. In a similar vein, while global trade growth is expected to slow sharply from 4.6% to 3.3% this year (down from 3.6% last month), it should still be stronger than in 2012–16, providing a solid backdrop for exporters. ▀ Meanwhile, financial markets have rebounded sharply from the December sell‐off due to renewed optimism regarding US and China trade talks and a more dovish Fed. We now expect the Fed to leave rates on hold until at least Q3 and hike rates only once this year. This, along with lower government bond yields and weaker inflation, is also likely to reduce the need for monetary tightening elsewhere, particularly in emerging markets (EMs), helping to support global growth later in the year. ▀ Overall, we still see global GDP growth softening in H1, but with a modest rebound in H2 as Chinese growth stabilises and EMs and European growth regain momentum. Sharper slowdowns in China and global trade and financial‐market weakness remain key concerns for the 2020 outlook. But the risk of inflation‐induced policy tightening is still low and the odds of a renewed flare‐up in trade tensions have ebbed lately.

Современные аспекты финансовой безопасности России в условиях кризиса

There are a small number of highly vulnerable countries, but their economies are weakenedby the slowdown in international trade, rising interest rates, and falling global business activity. Itshould be noted that the main task of state policy aimed at ensuring the economic security of the stateis the introduction of measures aimed at ensuring the socio-economic interests of society and achievingthe stability of the national economy, and especially the stability of its financial component, whichis primarily due to the strengthening in the XXI century of the integration and consolidation of financialmarkets and the formation of the global financial system. The authors define and classify various theoreticalconcepts of financial security as a dynamically developing state of financial processes and economicrelations. The analysis of financial security of the country was carried out – as the most important conditionof formation of adequate strategy of economic development of the territory of the state.The development of an effective mechanism to ensure the financial security of the state is impossiblewithout scientific understanding of its economic essence, research and development of methodsof evaluation and revision of theoretical approaches to ensuring the stability and stability of the financialsystem.The scientific novelty of the study lies in the substantiation of the author’s concept of improving themechanism of ensuring the financial security of Russia in the economic situation in the country.

Comments by Prema-chandra Athukorala, on Are Production Networks Passé in East Asia? Not Yet

October 01 2018 Comments by Prema-chandra Athukorala, on Are Production Networks Passé in East Asia? Not Yet Author and Article Information Online Issn: 1536-0083 Print Issn: 1535-3516 © 2018 by the Asian Economic Panel and the Massachusetts Institute of Technology2018Massachusetts Institute of Technology Asian Economic Papers (2018) 17 (3): 109–112. https://doi.org/10.1162/asep_a_00638 Cite Icon Cite Permissions Share Icon Share Facebook Twitter LinkedIn MailTo Views Icon Views Article contents Figures & tables Video Audio Supplementary Data Peer Review Search Site Citation Comments by Prema-chandra Athukorala, on Are Production Networks Passé in East Asia? Not Yet. Asian Economic Papers 2018; 17 (3): 109–112. doi: https://doi.org/10.1162/asep_a_00638 Download citation file: Ris (Zotero) Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search All ContentAll JournalsAsian Economic Papers Search Advanced Search Prema-chandra Athukorala: The purpose of this paper is to examine whether global production networks (GPNs) in East Asia have run out of steam, in the context of the debate on global trade slowdown. A key strand of this debate, which is based on circumstantial evidence or pure speculation, is that trade slowdown in recent years was partly underpinned by sluggish growth of trade based on global production sharing—that is, trade in parts and components and final assembly taking place within GPNs (GPN trade). As far as I know, this is the first systematic empirical analysis of this issue. It is an innovative contribution that helps broaden our understanding of the East Asian growth dynamism and the relevance of global production sharing as a mechanism of global economic integration for latecomers to export-oriented industrialization. The inferences in the previous literature on global trade slowdown has solely focused on “trade to world... You do not currently have access to this content.

Are Production Networks Passé in East Asia? Not Yet

Many people have a vague notion that the room for expanding international production networks is almost exhausted and that therefore international trade has slowed down since the recovery from the great trade collapse. This paper presents evidence against such a belief in the East Asian context by classifying finely disaggregated trade data based on the stages of the production process. The trade slowdown was attributed mainly to sluggishness of trade in primary goods and processed raw materials. In contrast, East Asian trade in manufactured parts and components and the assembled end-products within production networks continued to expand steadily.

Upturn Loses Momentum – World Economic Climate Grows Harsher

The economic upturn in Germany is entering its sixth year but is losing momentum due to both demand and supply side factors. On the one hand, Germany’s key sales markets have weakened in line with the slowdown in world trade. On the other hand, a growing number of firms face production side bottlenecks, especially in terms of labour and sourcing intermediate goods. This coincides with problems in the automotive industry related to the introduction of the new World Harmonised Light Vehicle Test Procedure (WLTP), which has affected gross domestic product (GDP) growth due to the branch’s economic weight. These adjustment problems, however, should be overcome over the course of the winter. Fiscal stimuli will also take effect as of the beginning of 2019. After 1.7 % growth this year, GDP will increase at rates of 1.9 % in 2019 and 1.8 % in 2020.

The Slowdown in Global Trade: A Symptom of a Weak Recovery?

Global trade growth has slowed since 2012 relative both to its strong historical performance and to overall economic growth. This paper aims to quantify the role of weak economic growth and changes in its decomposition in accounting for the slowdown in trade using a reduced form and a structural approach. Both analytical investigations suggest that the overall weakness in economic activity, particularly investment, has been the primary restraint on trade growth, accounting for about 80% of the decline in the growth of the volume of goods trade between 2012–2016 and 2003–2007. However, other factors are also weighing on trade in recent years, especially in emerging market and developing economies, as evidenced by the non-negligible role attributed to trade costs by the structural approach.

The Future of East Asia’s Trade: A Call for Better Globalization

This paper is about how East Asia should respond to the challenges of the external environment. The first challenge is the current slowdown in trade, which has been due to cyclical and structural factors such as the decline in productivity and the maturation of global value chains. The rise in protectionism as measured by rising trade restrictiveness has not impacted on trade, but political and policy uncertainty regarding the direction of trade policy seems to have begun to impact on trade growth. The policy stance of increased protectionism and a retreat from the multilateral rules‐based trading system is linked to the pockets of the population who have not seen their incomes improve and who have blamed their plight and increased inequality on globalization. In fact, the issue is more about the lack of effective responses to manage the costs of trade liberalization. East Asian economies need to respond to these challenges by upholding the multilateral rules‐based trading system, continuing the various pathways to regional economic integration, and ensuring better globalization through effective capacity building and policies to address the negative effects of trade liberalization.

The Global Trade Slowdown: Cyclical or Structural?

Abstract This paper focuses on the sluggish growth of world trade relative to income growth in recent years. We use a simple empirical strategy based on an error correction model to assess whether the global trade slowdown is structural or cyclical. An estimate of the relationship between trade and income in the past four decades reveals that the long-term trade elasticity rose sharply in the 1990s, but declined significantly in the 2000s, even before the global financial crisis. These results suggest that trade is growing slowly not only because of slow GDP growth, but also because of a structural change in the trade-GDP relationship in recent years. The available evidence suggests that a key driver of structural change over the 2000s is the slowing pace of international vertical specialization, which accounts for between one-quarter and one-half of the decline in import growth from the 1990s to the 2000s.

Foreword

Shanta Devarajan, who is the Senior Director at the Development Economics – World Bank, said recently, in a forecasting about global economic growth at the beginning of 2018, that currently there is a set of optimistic projections for economic growth around the world. Ten years after the global financial crisis, every economic region – from the U.S. to Europe to Asia, Africa, and Latin America – is seeing an uptick in growth. One reason for the optimism is that economic growth was surprisingly better than anticipated in 2017. Almost every growth forecast at the beginning of the year was revised upward by the end of the year. Global growth, projected by the World Bank to be 2.7 % in January 2017, was estimated at 3 percent in December, with expectation to be at 3.1 percent in 2018. Furthermore, stock markets are booming. And the factors that caused growth to be subdued in the past – a slowdown in investment and trade and low commodity prices – are rebounding. Consequently, developing country growth is forecasted at a robust 4.5 percent in 2018, accelerating to 4.7 percent in the subsequent two years. This growth is not just driven by China, although the country’s economy is projected to grow at a robust 6.4 percent in 2018. Low-income countries’ growth will rise to 5.4 percent in 2018, accelerating to 5.6 percent in 2019-2020, as metal and mineral prices strengthen.

Global Imbalances and the Trade Slowdown

From the mid-1990s until the financial crisis, global trade grew twice as fast as global income, far faster than in previous or subsequent periods. During this period of rapid trade growth, global current account imbalances also expanded rapidly. If excess savings in some countries financed more consumption and investment in other countries, then trade and trade imbalances would move together. Greater capital mobility thus may help to explain why trade surged in the period before 2007 and why it slowed more sharply in later years when demand stalled. Consistent with this explanation, the countries that contributed most to global trade growth during the period of rapid trade growth also experienced large imbalances. Constraining trade deficits to historical norms, this paper shows that trade growth would have been more moderate in the late 1990s and early 2000s and stronger in subsequent years. Going forward, assuming global imbalances remain relatively unconstrained, the relationship between trade growth and income growth will likely be less stable than before the 1990s.

Global Trade Finance, Trade Collapse and Trade Slowdown: A Granger Causality Analysis

This research paper provides a causality assessment on the linkage between declines in world trade finance and the world trade collapse in the period following the Financial Crisis of 2008 and 2009 as well as the ensuing global trade slowdown. The paper performs Granger Causality tests on two time series: World trade (volume data acquired from the CPB World Trade Monitor) and World trade finance (transaction data acquired from SWIFT), using global monthly data from January 2007 to May 2017. In the short run, Granger causality always runs one-way from world trade finance to world trade. We always find two-way Granger causality for lags longer than two years. Importantly Granger causality never runs one-way from world trade to world trade finance. Given the short-term nature of trade finance, we conclude that world trade finance Granger-causes world trade.