Is The Global Trade Engine At Risk Of Being Derailed?
-Global trade is important to world economic growth: "By our estimates global trade in goods and services now amounts to 25% of world GDP, up dramatically from the 19% share just ten years ago and an 11% portion in 1970." More: "In other words, since the late 1980s there has been a virtual doubling of the role that trade has played in driving the global GDP growth dynamic. There can be no greater testament to the power of globalization."
-World trade is slumping: "After surging by a record 13% in 2000, global trade has entered one of its worst slumps in modern experience -- average gains of just 2% over the 2001-03 period. That’s the weakest performance since the early 1980s and only a third of what we estimate to be a 6.5% long-term trend in global trade growth . . . It suggests that there may be new forces coming into play that transcend the normal pressures of the business cycle."
Wondering about the future of the global economy? Current trends may provide a view: "The first is a new and powerful global labor arbitrage that has led to accelerating transfer of high-wage jobs from the developed world to lower-wage workforces in the developing world. Enabled by the Internet and the maturation of vast offshore outsourcing platforms in goods and services alike, labor has become more “fungible” than ever. In a world without pricing leverage, the unrelenting push for cost control gives a sudden urgency to this cross-border arbitrage. The outcome is a new and potentially lasting bias toward jobless recoveries in the high-wage developed world. That brings the second major force into play -- a political backlash against the trade liberalization that allows such cross-border job shifts to occur. It is the politics of this trend that disturb me the most as I peer into the future."
In other word, the trade globalization may be planting the seeds to its own political demise.