## TRADE, DISRUPTED

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---

### Recent trade trends and composition
- Global trade reached the highest value ever after 2020.
- As a share of GDP, global trade has fallen modestly, driven mostly by China and India.
- Decline reflects the end of an extraordinary export boom in China and India and fewer imports of intermediate goods than in the past.
- Imports of intermediates by the rest of the world are still growing; exports by the rest of the world are also still growing.
- American and Chinese tariffs introduced in 2018 curtailed trade between the US and China but did not reduce overall trade; affected-product trade grew among the rest of the world (trade was reallocated, not reduced).
- Many governments continue to pursue economic integration (examples include deals easing professional mobility or common consumer-safety standards).
- During the COVID-19 pandemic some countries temporarily restricted exports of medicines and some halted shipments of wheat and other foods as prices spiked following Russia’s invasion of Ukraine.

### Change in public attitudes and policy stance
- Public and policy attitudes toward global trade shifted markedly between 2015 and the present.
- University of Chicago’s Booth School of Business polls of economists:
  - In March 2018, 100 percent of those surveyed were against the initial US tariffs.
  - In January 2022, respondents were skeptical about global supply chains: only 2 out of 44 economists disagreed with the statement that reliance on foreign inputs had made American industries vulnerable to disruptions.
- Terms such as “national security” and “reshoring” have appeared more frequently in news articles and research papers.

### Phases of the deglobalization movement (authors’ framing)
- Phase 1 (around 2015 onward):
  - Global backlash driven by anxiety about globalization and competition from low-wage countries (Brexit, US tariffs, China’s retaliation, resurgence of extremist views in Europe).
  - Distributional effects: many workers in advanced economies did worse than their parents; impacts had a distinct geographic component tied to exposure to import competition.
  - Winners: multinational “superstar” firms and highly compensated individuals benefiting from global value-chain specialization.
  - Policy response: mainstream economists largely rejected protectionism and endorsed redistribution from winners to losers.
- Phase 2 (2020 onset of the pandemic):
  - Calls for “resilience.” COVID-19 was both a supply shock and a demand shock.
  - Empirical evidence and model simulations (Goldberg and Reed 2023a; Caselli and others 2020; Bonadio and others 2021) indicate international trade increased resilience by providing diversified suppliers and lowering correlation of supply shocks across economies.
  - Example: US imports of medical goods come from a diverse group; except for face masks, shipments from China arrived within months and shortages were alleviated.
  - Overall: arguments emphasizing fragility of supply chains are not consistent with evidence; initial protectionist impulses were not enduring, and trade grew fast in 2021.
- Phase 3 (beginning February 2022 with Russia’s invasion of Ukraine):
  - Geopolitical pressures and concerns about reliance on single suppliers (e.g., Russia’s gas cuts and energy-price spikes) illustrated vulnerabilities.
  - Policymakers began considering decoupling from China on their own terms.
  - A new mindset emerged treating international welfare as a zero-sum game.
  - The United States imposed a ban on exports to China of advanced logic and memory chips and the machinery to produce them—actions that can retard civilian technological development as well as affect military capabilities.

### Possible futures and associated risks
- Two broad possibilities:
  - Limited decoupling: interventions confined to products with credible dual use, while other trade continues to flourish.
  - Rival camps / new cold war: fragmentation between the US and China (and their allies) with severe consequences.
- Risks of a fragmented world:
  - Reduced scientific collaboration could yield fewer solutions to future pandemics and endemic diseases.
  - Removing low-cost suppliers raises costs for decarbonization technologies (example: solar panels are substantially higher in cost in the West than in China; industry estimates suggest tariffs have slowed installation).
  - Trade exclusively with “friendly” countries may improve resilience to geopolitical shocks but reduce resilience to other shocks (such as health shocks); “friendship” is fluid.
  - Within countries: greater trade barriers likely raise prices and lower real wages, potentially increasing inequality.
  - Across countries: geoeconomic fragmentation could increase global inequality and raise entry barriers for very poor countries through emphasis on environmental and labor standards in trade agreements—threatening poverty reduction and development prospects.
  - Geopolitical risk to peace: historical precedent from the 1930s—shift away from multilateral trade toward empires/spheres of influence—exacerbated tensions ahead of World War II; a similar dynamic could raise the risk of conflict.

### Analytical conclusions and policy implications
- Hyperglobalization delivered substantial economic gains: dramatic reduction in extreme poverty, rising income per capita, wider access to goods at affordable prices, and low inflation despite unconventional monetary policy.
- Trade and openness played essential roles in past improvements in living standards; tensions and distributional consequences emerged nonetheless.
- Protectionism is not an effective cure for distributional harms; economists recommended redistribution from winners to losers rather than protectionism.
- Empirical evidence suggests international trade generally increases resilience by diversifying suppliers and reducing exposure to correlated shocks.
- Restricting global trade is unlikely to increase overall resilience; trade policy should be evaluated relative to specific shocks and with attention to tradeoffs across types of shocks.
- Policymakers face critical choices that will determine whether deglobalization stops at targeted interventions or leads to broad, lasting fragmentation with sizable economic and geopolitical costs.

---

### Resurgence of export restrictions: risks and dynamics
- Export restrictions—bans, controls, and sanctions—are resurging and threaten the rules-based trading system.
- Such measures can create political-economic pressure (example: Russia withholding energy shipments to Europe through its pipelines).
- Headline-grabbing policies often prompt trading partners to respond with additional actions—frequently conflicting with other WTO rules—raising the risk of a downward spiral.
- Historical example: 2007–11 export restrictions on agricultural products drove up world prices and contributed to food insecurity; policy response included the launch of the Agricultural Market Information System (AMIS) by G20 agricultural ministers.

### WTO rules and their limitations
- WTO rules that might limit national use of export restrictions are relatively weak.
  - Article XI, GATT: Allows exceptions for “export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party” (emphasis in source). “Essential products” are not defined.
  - Article XX1: Provides a national security exception allowing countries to invoke policies to protect essential security interests.
- The multilateral trading system developed during the Cold War did not confront difficult questions about export controls, military adversaries, and related sanctions to the extent required today.
- Legal rulings from WTO dispute settlement over security-motivated measures have strained the multilateral system.

### Suggested WTO roles and policy measures for export restrictions
- Encourage members to limit use of export restrictions and to keep them targeted and temporary when sales limits must be implemented.
- Strengthen market surveillance and transparency initiatives (AMIS cited as a model) to reduce policy actions taken from information shortages and fear of market shortages.
- For security-related export controls, consider alternatives to protracted litigation:
  - Pursue “non-violation” claims that could move disputes immediately to arbitration after a national security invocation, with concessions to “rebalance” trade.
  - Use reciprocity/retaliation logic to raise the cost of invoking security exceptions and discourage overuse.
  - Favor quick arbitration over waiting years for the normal WTO legal process.
- Provide capacity support for developing countries:
  - Extend subsidized legal assistance (analogous to the Advisory Centre on WTO Law) to help emerging market economies navigate sanctions and export control compliance and avoid overcompliance that carries economic costs.
  - Use Trade Facilitation Agreement precedent to support border officials in complying with sanctions while keeping legitimate trade flowing.

---

### The case for policy intervention and supply-chain concentration
- Two opposing market failures identified (Grossman, Helpman, and Lhuillier 2023):
  - Firms may underinvest in supply chain resilience because some costs of supply chain disruptions are incurred by consumers.
  - Firms may over-invest in supply chain resilience because they can benefit from extraordinary profit opportunities during disruptions.
- Implication: "The case for policy intervention is rather subtle" — governments may choose reshoring, offshoring, nothing, or both.
- National security considerations can justify limited interventions when firms do not internalize security externalities.

### Evidence on supply chain concentration and resilience
- Empirical points:
  - Only a small minority of US firms import the same product from more than one source country (Antràs, Fort, and Tintelnot 2017).
  - WTO economists estimate that 19 percent of global exports are in “bottleneck” products (Majune and Stolzenburg, forthcoming).
  - The share of bottleneck products has doubled over the past two decades.
- Resilience of trade in recent crises:
  - After the COVID-19 outbreak, trade recovered within three quarters of the downturn in Q2 2020.
  - Trade supplied masks, vaccines, and home office equipment during the pandemic.
  - One year into the war in Ukraine, trade performed above expectations after initial slumps in products such as wheat, helping largely avoid food shortages in countries such as Egypt, Ethiopia, and Türkiye.
- Case study — Ethiopia:
  - Prewar wheat imports: 45 percent from Russia and Ukraine.
  - Postwar change: imports from Russia plunged by 75 percent and from Ukraine by 99.9 percent.
  - Ethiopia sharply increased wheat imports from the United States and Argentina; it had not imported from Argentina before the war—demonstrates rapid supplier substitution facilitated by broad multilateral access.

### The value of a strong multilateral trading system
- A strong rules-based WTO-centered multilateral trading system provides "flexicurity"—flexibility for households and firms facing supply shortages.
- It reduces policy-induced supply chain disruptions and increases likelihood markets stay open when alternative sources are needed.
- Predictability and credibility matter:
  - Handley (2014): a reduction in bound tariffs increases trade flows even if applied tariffs remain unchanged because lowering bound tariffs reduces trade policy uncertainty.
  - Tariff overhang arises when applied tariffs are lower than bound tariffs.
- Main policy role: provide an economic framework where resilient supply chains can thrive by defending low, nondiscriminatory, and predictable trade barriers.
- Reglobalization: work toward more inclusive globalization that allows a broader range of countries to participate in global value chains.

---

### The rise of discriminatory regionalism
- RTAs increased from fewer than 50 in 1990 to more than 350 today; newer RTAs are “deeper,” addressing more policy areas beyond tariffs and customs.
- Three overlapping policy areas regulated by modern RTAs:
  - Integration of goods, services, and factor markets (tariffs, services, investment, intellectual property rights).
  - Restrictions on governments’ ability to reverse integration (regulatory barriers, sanitary measures, subsidies, competition rules).
  - Protection of rights vulnerable to integration (labor or environmental standards).
- Estimated impacts:
  - One study found deep RTAs increased trade between members by 40 percent on average.
  - Environmental provisions in RTAs prevented about 7,500 square kilometers of deforestation during 2003–14.
- Unintended consequences:
  - RTAs without child labor provisions reduced child employment and increased school enrollment; RTAs with child labor bans sometimes shrank children’s wages and increased child labor in poorer households.
- Complementarities between multilateralism and regionalism:
  - RTA law often rests on WTO laws and dispute mechanisms; many RTAs restate WTO commitments or use multilateral commitments to advance regional integration.
  - Many RTA commitments are nondiscriminatory and reduce costs for members and nonmembers alike.
- Risks:
  - In times of conflict, regionalism may weaken because RTA law would rest on shakier WTO laws and anti-integration forces may oppose deeper RTAs.
  - Surge of protectionist measures, local content requirements, and stringent rules of origin could increase discrimination against nonmembers.
- Policy message:
  - No simple choice between regionalism and multilateralism; the real choice is between integration and disintegration.
  - A revival of multilateralism is necessary to complement RTAs in an age of conflict.

---

### The costs of geoeconomic fragmentation — quantitative findings
- Model and coverage:
  - A quantitative multicountry model covering 24 aggregated sectors and 136 disaggregated commodities across 145 countries—representing 99 percent of global GDP—was used to simulate impacts of changes in trade barriers on prices, trade flows, and incomes.
- Strategic decoupling scenario (elimination of all trade between Russia and the United States and the European Union; elimination of trade in high-tech sectors between China and the United States and European Union, expanded to all high-tech goods):
  - Permanent global GDP losses of 0.3 percent—roughly equivalent to the annual output of Norway.
  - Some countries may see small gains if the rest of the world keeps trading freely with Russia, China, the United States, and the European Union (for example, commodity exporters replacing Russia, or relocation of semiconductor supply chains benefiting some Asian countries).
- Geoeconomic fragmentation scenario (all countries forced to choose between either the United States–European Union bloc or the China–Russia bloc, with no trade between these two blocs):
  - Global output losses of 2.3 percent of global GDP—equivalent to the size of the French economy.
  - Permanent losses for advanced economies and emerging markets would be on the order of 2 to 3 percent.
  - Low-income countries would lose more than 4 percent of GDP.
- Faster or more disruptive adjustment processes increase costs:
  - Global GDP losses could be as high as 7 percent if adjustment costs are particularly large.
- Historical comparison:
  - Global GDP losses under severe fragmentation would be on the order of the 2020 output losses due to COVID; however, fragmentation losses would be permanent rather than temporary.

### Mechanisms and distributional impacts
- Trade barriers raise consumer prices and reduce household incomes through:
  - Direct price increases on imported goods (example: semiconductors raising computer prices).
  - Income losses for workers in export industries facing shrinking market access.
  - Indirect input-price effects along supply chains (higher input costs for professional services and other sectors).
- Imperfect substitutability of commodities and concentration of commodity production in a few countries increase the cost of trade barriers.
- Low-income countries are particularly vulnerable because they are heavily dependent on imports and exports of key products and face higher costs finding new suppliers—raising risks of debt crises, social instability, and food insecurity.

### Policy recommendations to limit fragmentation damages
- Reinforce the World Trade Organization, including its dispute resolution mechanism, to avoid proliferation of unilateral trade barriers.
- Focus multilateral reform efforts on areas with high impact where countries’ preferred economic policies are broadly aligned.
- Where multilateral consensus is not feasible:
  - Pursue deeper integration through regional trade agreements while maintaining an open and nondiscriminatory stance toward other countries.
- Protect vulnerable countries when unilateral actions occur by deploying credible guardrails, for example:
  - Safe corridors for food and medicine.
  - Multilateral consultations to assess the economic impact of unilateral actions and identify unintended consequences.
- Strengthen and modernize the global trading system to preserve the benefits of economic integration and limit the damage from geoeconomic fragmentation.

---

### Trade and gender equality — key findings and mechanisms
- Trade is beneficial to women in several ways: higher employment, higher wages, better jobs, and higher incomes and consumption.
- Women in developing economies:
  - Make up 33 percent of the workforce of exporting firms, compared with 24 percent of non-exporting firms.
  - Firms part of global value chains or with foreign investors employ on average 11 to 12 percent more women compared with other firms.
  - Doubling the value of exports in a country’s manufacturing sector would increase the average female wage share from 24 to roughly 30 percent.
- Sectoral and informality statistics:
  - In highly integrated sectors, 13 percent of women work informally, compared with 20 percent in less integrated sectors.
  - For men, the probability of working informally falls from 9.5 percent in less integrated sectors to 5.0 percent in highly integrated sectors.
- Distributional impacts from tariff removal:
  - Eliminating import tariffs raises the average real income for female-headed households compared with male-headed households in more than three-quarters of the 54 developing economies analyzed.
  - On average, real income gains reaped by removing import tariffs would be 2.5 percent greater for households headed by women than for those headed by men.
  - In countries such as Burkina Faso and Cameroon, the increase from removing import tariffs is equivalent to one year’s spending on education or health.
- Barriers and policy responses:
  - Female-intensive sectors (food and beverages; textiles and apparel) on average face higher tariffs on inputs.
  - India’s “pink tariff” amounts to 6 percentage points (Mendoza, Nayyar, and Piermartini 2018).
  - Nontariff measures disproportionately burden small and medium enterprises—often owned by women.
- Policy recommendations:
  - Adjust tariff policies that disproportionately affect female-intensive sectors to reduce the “pink tariff.”
  - Advance international cooperation on trade policy to close the gender gap in tariffs and on trade facilitation to streamline regulatory requirements.
  - Implement policies to improve access to education, financial resources, digital technologies, and information for women.
  - Complement trade openness with labor market policies (social safety nets, retraining) to help women acquire new skills or relocate to areas with improving job opportunities.
  - Conduct additional studies requiring more gender-disaggregated data.

---

*Source: Penelopi K. Goldberg and Tristan Reed, “Trade, Disrupted,” Finance & Development, June 2023.*

### 2020. But since then trade has rebounded to the

### TRADE, DISRUPTED

### Recent trade trends and composition
- Global trade reached the highest value ever after 2020.
- As a share of GDP, global trade has fallen modestly, driven mostly by China and India.
- This decline reflects the end of an extraordinary export boom in China and India and fewer imports of intermediate goods than in the past.
- Imports of intermediates by the rest of the world are still growing. The same is true of exports.
- American and Chinese tariffs introduced in 2018 did not reduce trade overall: they curtailed trade between the US and China, but trade in the products most affected by tariffs grew among the rest of the world (trade was reallocated, not reduced).
- Many governments continue to pursue economic integration (for example, deals easing professional mobility or common consumer-safety standards).
- During the COVID-19 pandemic some countries temporarily restricted exports of medicines and some halted shipments of wheat and other foods as prices spiked following Russia’s invasion of Ukraine.

### Change in public attitudes and policy stance
- Public and policy attitudes toward global trade shifted markedly between 2015 and the present.
- University of Chicago’s Booth School of Business polls of economists:
  - In March 2018, 100 percent of those surveyed were against the initial US tariffs.
  - In January 2022, respondents were skeptical about global supply chains: only 2 out of 44 economists disagreed with the statement that reliance on foreign inputs had made American industries vulnerable to disruptions.
- Terms such as “national security” and “reshoring” have appeared more frequently in news articles and research papers.

### Phases of the deglobalization movement (authors’ framing)
- Phase 1 (around 2015 onward): Global backlash driven by anxiety about globalization and competition from low-wage countries, producing events such as Brexit, US tariffs, China’s retaliation, and a resurgence of extremist views in Europe.
  - Distributional effects: many workers in advanced economies did worse than their parents; impacts had a distinct geographic component tied to exposure to import competition.
  - Winners: multinational “superstar” firms and highly compensated individuals benefiting from global value-chain specialization.
  - Policy response: mainstream economists largely rejected protectionism and endorsed redistribution from winners to losers.
- Phase 2 (2020 onset of the pandemic): Calls for “resilience.”
  - COVID-19 was both a supply shock (lockdowns slowing deliveries) and a demand shock (sudden demand for medical goods and durable goods).
  - Empirical evidence and model simulations (Goldberg and Reed 2023a; Caselli and others 2020; Bonadio and others 2021) indicate international trade increased resilience by providing diversified suppliers and lowering correlation of supply shocks across economies.
  - Example: US imports of medical goods come from a diverse group; except for face masks, shipments from China arrived within months and shortages were alleviated.
  - Overall: arguments that emphasize fragility of supply chains are not consistent with evidence; initial protectionist impulses were not enduring, and trade grew fast in 2021.
- Phase 3 (beginning February 2022 with Russia’s invasion of Ukraine): Geopolitical pressures and concerns about reliance on single suppliers.
  - Russia’s gas cuts to Europe and energy-price spikes illustrated vulnerabilities from dependence on a single country for critical inputs.
  - Policymakers began considering decoupling from China on their own terms.
  - A new mindset emerged treating international welfare as a zero-sum game.
  - The United States imposed a ban on exports to China of advanced logic and memory chips and the machinery to produce them—actions that can retard civilian technological development as well as affect military capabilities.

### Possible futures and associated risks
- Two broad possibilities:
  - Limited decoupling: interventions to foreclose technology access remain confined to products with credible dual use, while other trade continues to flourish.
  - Rival camps / new cold war: fragmentation between the US and China (and their allies) leading to severe consequences.
- Risks of a fragmented world:
  - Reduced scientific collaboration (e.g., between China and the US) could yield fewer solutions to future pandemics and endemic diseases.
  - Removing low-cost suppliers raises costs for decarbonization technologies (example: solar panels are substantially higher in cost in the West than in China; industry estimates suggest tariffs have slowed installation).
  - Trade exclusively with “friendly” countries may improve resilience to geopolitical shocks but reduce resilience to other shocks (such as health shocks); the concept of “friendship” is itself fluid.
  - Within countries: greater trade barriers likely raise prices and lower real wages, potentially increasing inequality.
  - Across countries: geoeconomic fragmentation could increase global inequality and raise entry barriers for very poor countries through emphasis on environmental and labor standards in trade agreements—threatening poverty reduction and development prospects.
  - Geopolitical risk to peace: historical precedent (1930s shift away from multilateral trade toward empires/spheres of influence) exacerbated tensions ahead of World War II; a similar dynamic could raise the risk of conflict.

### Analytical conclusions and policy implications
- Hyperglobalization delivered substantial economic gains: dramatic reduction in extreme poverty, rising income per capita, wider access to goods at affordable prices, and low inflation despite unconventional monetary policy.
- Trade and openness played essential roles in past improvements in living standards; tensions and distributional consequences emerged nonetheless.
- Protectionism is not an effective cure for distributional harms; economists recommended redistribution from winners to losers rather than protectionism.
- Empirical evidence suggests international trade generally increases resilience by diversifying suppliers and reducing exposure to correlated shocks.
- Restricting global trade is unlikely to increase overall resilience; trade policy should be evaluated relative to specific shocks and with attention to tradeoffs across types of shocks.
- Policymakers face critical choices that will determine whether deglobalization stops at targeted interventions or leads to broad, lasting fragmentation with sizable economic and geopolitical costs.

*Source: Penelopi K. Goldberg and Tristan Reed, “Trade, Disrupted,” Finance & Development, June 2023.*

### References:

### fd0623 - References

### References (selected citations as listed)
- Bonadio, Barthélémy, Zhen Huo, Andrei Levchenko, and Nitya Pandalai-Nayar. 2021. “Global Supply Chains in the Pandemic.” Journal of International Economics 133 (November): 103534.  
- Caselli, Francesco, Miklós Koren, Milan Lisicky, and Silvana Tenreyro. 2020. “Diversification through Trade.” Quarterly Journal of Economics 135 (1): 449–502.  
- Goldberg, Pinelopi K., and Tristan Reed. 2022. “Demand-Side Constraints in Development: The Role of Market Size, Trade, and (In)Equality.” Yale University Working Paper, New Haven, CT.  
- Goldberg, Pinelopi K., and Tristan Reed. 2023a. “Is the Global Economy Deglobalizing? And if So, Why? And What Is Next?” Brookings Papers on Economic Activity (March).  
- Goldberg, Pinelopi K. 2023b. The Unequal Effects of Globalization. Cambridge, MA: MIT Press.

### Major findings and analysis — “World Trade Can Still Drive Prosperity” (Kristalina Georgieva and Ngozi Okonjo‑Iweala)
- Poverty and trade dynamics:
  - Fewer than 1 in 10 of the world’s people are poor, a fourfold reduction since 1990.
  - Low- and middle-income countries have doubled their share of global trade.
  - International trade has increased twentyfold since 1960.
- Recent policy shifts and risks:
  - Trade restrictions and subsidies increased after the global financial crisis and escalated as governments responded to the pandemic and Russia’s war in Ukraine.
  - Foreign direct investment is increasingly concentrated among geopolitically aligned countries.
  - WTO research: a scenario where the world divides into two separate trading blocs could lead to a 5 percent drop in global GDP.
  - IMF estimate: global losses from trade fragmentation could range from 0.2 to 7 percent of GDP.
  - Emerging market economies and low-income countries are most at risk due to loss of knowledge transfer.
- Resilience and re‑globalization opportunities:
  - During the war in Ukraine, diversified markets allowed importers to replace lost supply (example: Ethiopia lost all its wheat imports from Ukraine but now sources 20 percent of its wheat shipments from Argentina).
  - Trade was crucial during the pandemic for production and distribution of medical supplies, including vaccines.
  - The price of solar power has fallen by almost 90 percent since 2010; WTO estimates 40 percent of this decline has come from scale economies made possible partly by trade and cross-border value chains.
- Future policy priorities:
  - Trade policy agenda should be inclusive, green, and increasingly digitally and services driven.
  - Global exports of digital services reached $3.8 trillion in 2022, or 54 percent of total services exports.
  - Nearly 90 WTO members, including China, the EU, and the US, are negotiating basic rules on digital trade.
  - Multilateral cooperation and common standards can speed the green transition and prevent market fragmentation.
  - WTO ministerial meeting scheduled for February 2024 as an opportunity to build on recent cooperative successes (curbing harmful fisheries subsidies; removing barriers to food aid; enhancing access to intellectual property behind COVID vaccines).
- Policy recommendations:
  - Reinforce the trading system to safeguard benefits and prevent losses.
  - Deploy well-designed domestic policies—social safety nets, training, credit, housing, infrastructure—to help those left behind.
  - Keep trade open while adapting international institutions to a fast-changing world; IMF and WTO roles highlighted.

### Major findings and analysis — “The Return of Industrial Policy” (Douglas Irwin)
- Historical perspective and misreadings:
  - The United States developed as an open economy despite high tariffs; growth linked to productivity increases beyond manufacturing.
  - South Korea in 1960 exported just 1 percent of GDP; by the early 1970s exports reached 20 percent of GDP after devaluation and export expansion. Korea’s Heavy and Chemical Industry Drive occurred in 1973–79 and was later terminated.
- Contemporary developments:
  - China’s policy shift under President Xi Jinping toward state control and initiatives such as Made in China 2025 and “dual circulation.”
  - The United States’ adoption of protective measures (steel and aluminum protection under the Trump administration) and recent measures including the CHIPS Act and the Inflation Reduction Act to “reshore” semiconductors and impose national content regulations for electric vehicles.
  - The European Union’s 2020 industrial strategy to enhance “open strategic autonomy.”
- Risks and policy guidance for developing economies:
  - Large-scale industrial subsidies are risky and can be fiscally expensive with elusive benefits; fiscally strapped developing economies should prioritize health, education, and poverty alleviation over lavish subsidies.
  - Examples of subsidy inefficiency: China’s shipbuilding subsidies (identified in 2006) produced excess capacity, forced adjustments by more efficient countries, and did not yield significant industry-wide spillovers.
  - Developing economies benefited from engagement with world markets (China, India post‑1991 reforms, Bangladesh, Ethiopia, Vietnam) and should avoid returning to closed-door policies.
  - Recommendation: continue supporting export promotion and acquisition of foreign technology rather than broad-based protectionism.

### Major findings and analysis — “Intersecting Paths” (Caroline Freund)
- Interaction of technology and trade:
  - Technological change and international trade together accelerate innovation, technology adoption, and economic growth but can polarize outcomes within and between countries.
  - New goods (smartphones, flat-screen TVs), processes (automation, 3D printing), and transport/telecommunications advances expand trade and promote development.
  - Automation can reduce demand for simple production stages but often raises demand for imported parts; example: in automobile production, robotization in advanced economies coincided with an increase in imported parts and components from low-income countries.
- Political economy and risks:
  - Export controls and restrictions can slow technological diffusion, depress global growth and innovation, and be detrimental to environmental goods and green innovation.
  - Example outcomes: slower global diffusion of renewables raises costs of decarbonization.
  - Geopolitical tensions (US tariffs on most imports from China; China’s reciprocal measures) are slowing growth in the two largest economies and hurting global innovation.
- Policy prescriptions:
  - Strengthen social safety nets, unemployment insurance, and retraining programs to keep trade open while supporting those harmed by technological and trade-driven change.
  - Protect only narrowly defined products threatened by technology, expand integration with trusted partners, and maintain predictable, rules-based systems to attract innovation and investment.
  - Warns against broad protectionism—tariffs and subsidies are contagious and risk spiraling retaliation that would hinder global income growth.

### Major findings and analysis — “The Challenge of Export Controls” (Chad P. Bown)
- Institutional strain and practical challenges:
  - The World Trade Organization is struggling to define its role amid a changing geopolitical climate marked by trade wars and real wars.
  - The multilateral system faces difficulty in facilitating additional trade liberalization while members pursue sanctions and export controls.
  - The United States abandoned its use of the dispute settlement system altogether (contextual statement from the text).
- Illustrative cases:
  - India’s April 2021 ban on exports of COVID-19 vaccines: motivated by domestic public health needs but disrupted commitments to COVAX and commandeered international funding and production capacity intended for global distribution.
  - Russia’s weaponization of natural gas exports (text alludes to this as an unfolding example).
- Implication for developing economies:
  - Developing economies will need help navigating growing numbers of sanctions and export controls that complicate trade policy and access to critical goods.
  - The WTO’s limited capacity to manage these disputes constrains avenues for multilateral resolution in the near term.

*Source: fd0623 - References (content as provided).*

### 2022. Alongside its invasion of Ukraine, Russia

### 2022. Alongside its invasion of Ukraine, Russia

### Resurgence of export restrictions: risks and dynamics
- Export restrictions—bans, controls, and sanctions—are resurging in novel contexts and pose a threat to the rules-based trading system.
- Such measures can create political-economic pressure (example: Russia withholding energy shipments to Europe through its pipelines).
- Headline-grabbing policies often prompt trading partners to respond with additional actions—frequently conflicting with other WTO rules—raising the risk of a downward spiral.

### Examples and historical context
- 2007–11: In response to spiking commodity prices, countries restricted exports of a variety of agricultural products; this drove up world prices further and contributed to food insecurity.
  - Policy response: Launch of the Agricultural Market Information System (AMIS) by G20 agricultural ministers to improve monitoring of global food stocks and reduce uncertainty.
- China: Historically used policies to restrict exports of raw materials and other critical inputs, diverting supplies to domestic markets and implicitly subsidizing downstream industries despite its 2001 WTO accession commitment not to restrict exports.
  - China lost two formal WTO disputes over the issue and faced a third in 2016 before the United... (text indicates litigation history).
- Post-2022: The United States and other industrialized economies have imposed export controls on high-technology products, sometimes ex post (after an act of war) and sometimes proactively (examples: Japan and The Netherlands agreeing with the United States to jointly restrict exports of equipment used for production of advanced node semiconductors in response to Chinese President Xi Jinping’s “military-civil fusion” policy).

### WTO rules and their limitations
- WTO rules that might limit national use of export restrictions are relatively weak.
  - Article XI, GATT: Allows exceptions for “export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party” (emphasis in source). “Essential products” are not defined.
  - Article XX1: Provides a national security exception allowing countries to invoke policies to protect essential security interests.
- The multilateral trading system developed during the Cold War did not confront difficult questions about export controls, military adversaries, and related sanctions to the extent required today.
- Legal rulings from WTO dispute settlement over security-motivated measures have strained the multilateral system, producing limited constructive outcomes.

### Suggested WTO roles and policy measures
- Encourage members to limit use of export restrictions and to keep them targeted and temporary when sales limits must be implemented.
- Strengthen market surveillance and transparency initiatives (AMIS cited as a model) to reduce policy actions taken from information shortages and fear of market shortages.
- For security-related export controls, consider alternatives to protracted litigation:
  - The United States has suggested pursuing “non-violation” claims that could move disputes immediately to arbitration after a national security invocation, with concessions to “rebalance” trade.
  - Reciprocity/retaliation logic: If one country restricts exports, expectation of similar measures from trading partners would raise the cost of invoking security exceptions and discourage overuse.
  - Speed: Quick arbitration would be preferable to waiting years for the normal WTO legal process.

### New vulnerabilities for capacity-constrained and nonaligned developing economies
- Sanctions and export controls linked to Russia’s invasion of Ukraine create complex compliance and economic decisions for nonaligned developing countries that wish to remain neutral.
- Three illustrative cases:
  - Food and fertilizer: Russia is a major global supplier; removing Russian wheat would harm global food security. Sanctioning countries attempted to clarify that trade in humanitarian goods would be legally permissible and included carve-outs in sanctions.
  - Crude oil and petroleum products: G7 developed a plan to encourage purchases of Russian products only if transactions fell below a price cap. Compliance is complicated by information needs and changing cap levels; the economic differential for countries able to transact at the cap could be substantial.
  - Dual-use high-tech goods (e.g., semiconductors): US export-controlled products sent to third countries often prohibit reexport under US law. Firms in third countries may engage in arbitrage for economic gain, but their governments—if not part of the sanctioning coalition—may not fully understand reexport consequences.
- Trade-offs for developing countries:
  - Governments may need to establish domestic screening procedures to prevent firms from reexporting controlled products.
  - Lack of legal counsel can lead to overcompliance, which carries economic costs.

### How the WTO system can help the most vulnerable
- Draw on WTO experience to assist capacity-constrained members:
  - Trade Facilitation Agreement precedent: The WTO has supported reducing bureaucratic barriers; analogously, it could work with border officials to help members comply with sanctions to avoid secondary sanctions and keep legitimate trade flowing.
  - Advisory Centre on WTO Law (ACWL) precedent: ACWL provides highly subsidized legal assistance to poor countries, supporting them in following WTO rules and representing them in formal dispute settlement over more than 20 years.
    - ACWL governance rules address conflicts of interest and allow support for different developing economies as complainant and respondent in separate cases.
- Proposed extension: Provide subsidized legal assistance for sanctions or export control compliance to help emerging market economies navigate a more expensive and legalistic trading environment.
  - Political sensitivity acknowledged, but for countries with limited capacity, ignoring compliance risks “severe economic consequences.”
  - In a world with more sanctions and export controls, emerging market economies will need even more legal advice to continue trading in support of their economic development.

### Broader implications and other contexts
- Russia’s case is complex but illustrative; export controls motivated by attempts to prevent future conflict (for example, impacting sales to China) raise similar and broader concerns.
- The WTO cannot prevent countries from implementing national security policies, but it can help “innocent bystanders” remain neutral and protect gains from globalization.

*Chad P. Bown, Reginald Jones Senior Fellow at the Peterson Institute for International Economics.*

### 6.4 percent for developed economies to 10.2 per-

### 6.4 percent for developed economies to 10.2 percent for developing economies to 11.3 percent for least developed economies.

### The case for policy intervention
- Two opposing market failures identified (Grossman, Helpman, and Lhuillier 2023):
  - Firms may underinvest in supply chain resilience because some costs of supply chain disruptions are incurred by consumers.
  - Firms may over-invest in supply chain resilience because they can benefit from extraordinary profit opportunities during disruptions.
- Implication: "The case for policy intervention is rather subtle" — governments may choose reshoring, offshoring, nothing, or both.
- National security considerations can alter the analysis:
  - There may be circumstances where firms do not internalize security externalities of their commercial activities, which could justify limited interventions designed to internalize these externalities.

### Evidence on supply chain concentration and resilience
- Empirical points:
  - Only a small minority of US firms import the same product from more than one source country (Antràs, Fort, and Tintelnot 2017).
  - WTO economists estimate that 19 percent of global exports are in “bottleneck” products (Majune and Stolzenburg, forthcoming).
  - The share of bottleneck products has doubled over the past two decades.
- Interpretation:
  - Observed concentration may reflect large sunk costs in forming global value chains (identifying suppliers, coordinating production, building trust).
  - Firms have incentives to avoid excessive diversification that undermines profit opportunities.
- Resilience of trade in recent crises:
  - After COVID-19 outbreak, trade recovered within three quarters of the downturn in Q2 2020.
  - Trade supplied masks, vaccines, and home office equipment during the pandemic.
  - One year into the war in Ukraine, trade performed above expectations after initial slumps in products such as wheat, helping largely avoid food shortages in heavily exposed countries such as Egypt, Ethiopia, and Türkiye.
- Case study — Ethiopia:
  - Prewar wheat imports: 45 percent from Russia and Ukraine.
  - Postwar change: imports from Russia plunged by 75 percent and from Ukraine by 99.9 percent.
  - Ethiopia sharply increased wheat imports from the United States and Argentina; it had not imported from Argentina before the war.
  - Demonstrates rapid supplier substitution facilitated by broad multilateral access.

### The value of a strong multilateral trading system
- Core argument:
  - A strong rules-based WTO-centered multilateral trading system provides "flexicurity" — unparalleled flexibility for households and firms facing supply shortages.
  - It reduces policy-induced supply chain disruptions and increases likelihood markets stay open when alternative sources are needed.
- Importance of predictability and credibility:
  - Handley (2014): a reduction in bound tariffs increases trade flows even if applied tariffs remain unchanged because lowering bound tariffs reduces trade policy uncertainty.
  - Tariff overhang arises when applied tariffs are lower than bound tariffs.
  - Preserving the credibility of multilateral commitments matters as much as the policies themselves; violations of WTO rules impose significant collateral damage by undermining the system.
  - WTO’s challenge in preserving credibility is compared to central banks’ challenge of anchoring inflation expectations.
- Policy implication:
  - Main policy role is to provide an economic framework where resilient supply chains can thrive by defending low, nondiscriminatory, and predictable trade barriers.

### Reglobalization and inclusion
- Policy direction:
  - To strengthen resilience of global supply chains, the WTO’s notion of “reglobalization” is proposed: work toward more inclusive globalization that allows a broader range of countries to participate in global value chains.

---

### The rise of discriminatory regionalism (excerpts on regional trade agreements)

### Deep, dynamic agreements and their effects
- Trends:
  - RTAs increased from fewer than 50 in 1990 to more than 350 today.
  - Newer RTAs are “deeper,” addressing more policy areas beyond tariffs and customs.
- Three overlapping policy areas regulated by modern RTAs:
  - Integration of goods, services, and factor markets (tariffs, services, investment, intellectual property rights).
  - Restrictions on governments’ ability to reverse integration (regulatory barriers, sanitary measures, subsidies, competition rules).
  - Protection of rights vulnerable to integration (labor or environmental standards).
- Estimated impacts:
  - One study found deep RTAs increased trade between members by 40 percent on average.
  - Environmental provisions in RTAs prevented about 7,500 square kilometers of deforestation during 2003–14.
  - RTAs can stimulate foreign direct investment, migration, and technology flows by reducing cross-border costs and legal uncertainties.
- Unintended consequences:
  - RTAs without child labor provisions reduced child employment and increased school enrollment; RTAs with child labor bans sometimes shrank children’s wages and increased child labor in poorer households.

### Complementarities between multilateralism and regionalism
- Mechanisms of complementarity:
  - Societal segments that favor multilateral integration (e.g., exporting firms) also support regional integration.
  - RTA law often rests on WTO laws and dispute mechanisms; many RTAs restate WTO commitments or use multilateral commitments to advance regional integration.
  - Many RTA commitments are nondiscriminatory and reduce costs for members and nonmembers alike.
- Risk in times of conflict:
  - Regionalism may weaken during conflict because RTA law would rest on shakier WTO laws and anti-integration forces may oppose deeper RTAs.

### Discriminatory regionalism: risks and recent signs
- Historical parallel:
  - 1930s protectionist regionalism increased trade discrimination and is blamed for escalating international tensions.
- Contemporary signs of discriminatory practices:
  - Surge of protectionist measures, including local content requirements in subsidy programs and export restrictions targeting non-regional partners.
  - Stringent rules of origin designed to increase regional value content at the expense of extraregional value content.
- Potential objectives of discriminatory RTAs:
  - Achieving nontrade objectives such as higher labor and environmental standards, adoption of domestic rather than global standards, or redirection of supply chains for national security.
- Example noted:
  - An agreement signed at the end of March between Japan and the United States on certain critical minerals may be the first of new limited-scope deals; this differs from the deep RTAs of past decades and raises questions about consistency with multilateral rules.

### An uncertain future: scenarios and policy implications
- Possible outcomes:
  - Regionalism could preserve member integration and experiment with new forms of integration, offering benefits especially in regions such as Africa where a continental market could yield significant development gains.
  - Without the anchor of multilateralism, RTAs may become more discriminatory, erecting protectionist walls against nonmembers and increasing integration costs.
- Policy message:
  - There is no simple choice between regionalism and multilateralism; the real choice is between integration and disintegration.
  - A revival of multilateralism is necessary to complement RTAs in an age of conflict.

*Ralph Ossa and Michele Ruta — excerpts from Finance & Development, June 2023.*

### References:

### THE COSTS OF GEOECONOMIC FRAGMENTATION (fd0623)

### Key findings on trade fragmentation and living standards
- A quantitative multicountry model covering 24 aggregated sectors and 136 disaggregated commodities across 145 countries—representing 99 percent of global GDP—was used to simulate impacts of changes in trade barriers on prices, trade flows, and incomes.
- The analysis focuses on output losses from geoeconomic fragmentation; total losses of fragmentation will likely be even larger.
- Strategic decoupling scenario (elimination of all trade between Russia and the United States and the European Union; elimination of trade in high-tech sectors between China and the United States and European Union, expanded to all high-tech goods):
  - Permanent global GDP losses of 0.3 percent—roughly equivalent to the annual output of Norway.
  - Some countries may see small gains if the rest of the world keeps trading freely with Russia, China, the United States, and the European Union (for example, commodity exporters replacing Russia, or relocation of semiconductor supply chains benefiting some Asian countries).
- Geoeconomic fragmentation scenario (all countries forced to choose between either the United States–European Union bloc or the China–Russia bloc, with no trade between these two blocs):
  - Global output losses of 2.3 percent of global GDP—equivalent to the size of the French economy.
  - Permanent losses for advanced economies and emerging markets would be on the order of 2 to 3 percent.
  - Low-income countries would lose more than 4 percent of GDP.
- Faster or more disruptive adjustment processes increase costs:
  - Global GDP losses could be as high as 7 percent if adjustment costs are particularly large.
- Historical comparison:
  - Global GDP losses under severe fragmentation would be on the order of the 2020 output losses due to COVID; however, fragmentation losses would be permanent rather than temporary.

### Mechanisms and distributional impacts
- Trade barriers raise consumer prices and reduce household incomes through:
  - Direct price increases on imported goods (example: semiconductors raising computer prices).
  - Income losses for workers in export industries facing shrinking market access.
  - Indirect input-price effects along supply chains (higher input costs for professional services and other sectors).
- Imperfect substitutability of commodities and concentration of commodity production in a few countries increase the cost of trade barriers.
- Low-income countries are particularly vulnerable because they are heavily dependent on imports and exports of key products (including commodities) and face higher costs finding new suppliers—raising risks of debt crises, social instability, and food insecurity.

### Data and modeling scope (as used in the analysis)
- Dataset details:
  - 24 aggregated sectors
  - 136 disaggregated commodities
  - 145 countries
  - Coverage: 99 percent of global GDP
- The dataset explicitly models imperfect substitutability among commodities and concentration of production—improving on other datasets that aggregate commodities and treat dissimilar products as perfect substitutes.

### Policy recommendations and modalities for limiting fragmentation damages
- Reinforce the World Trade Organization, including its dispute resolution mechanism, to avoid proliferation of unilateral trade barriers.
- Focus multilateral reform efforts on areas with high impact where countries’ preferred economic policies are broadly aligned.
- Where multilateral consensus is not feasible:
  - Pursue deeper integration through regional trade agreements while maintaining an open and nondiscriminatory stance toward other countries.
- Protect vulnerable countries when unilateral actions occur by deploying credible guardrails, for example:
  - Safe corridors for food and medicine.
  - Multilateral consultations to assess the economic impact of unilateral actions and identify unintended consequences.
- Strengthen and modernize the global trading system to preserve the benefits of economic integration and limit the damage from geoeconomic fragmentation.

*Source: FINANCE & DEVELOPMENT, June 2023 (fd0623).*

### References:

### fd0623 - References:

### Key findings on trade and gender equality
- Trade is beneficial to women in several ways, including higher employment, higher wages, better jobs, and higher incomes and consumption.
- In developing economies, women make up 33 percent of the workforce of exporting firms, compared with 24 percent of non-exporting firms.
- Firms that are part of global value chains or have foreign investors employ on average 11 to 12 percent more women compared with other firms.
- Doubling the value of exports in a country’s manufacturing sector would increase the average female wage share from 24 to roughly 30 percent.
- In a World Bank analysis on the potential impact of the African Continental Free Trade Area, models suggest that by 2035, wages for skilled and unskilled female labor could be 4 percent and 3.7 percent higher (relative to baseline), compared with a 3.2 percent increase for male workers at all skill levels.
- In highly integrated sectors, 13 percent of women work informally, compared with 20 percent in less integrated sectors.
- For men, the probability of working informally falls from 9.5 percent in less integrated sectors to 5.0 percent in highly integrated sectors.
- Eliminating import tariffs raises the average real income for female-headed households compared with male-headed households in more than three-quarters of the 54 developing economies analyzed.
- On average, real income gains reaped by removing import tariffs would be 2.5 percent greater for households headed by women than for those headed by men.
- In countries such as Burkina Faso and Cameroon, the increase from removing import tariffs is equivalent to one year’s spending on education or health.

### Mechanisms and channels through which trade affects women
- Trade affects women as workers (both at home and at work), as consumers, and as decision makers.
- Exporters, global value chain participants (GVC participants), importers, and firms with foreign ownership (FDI firms) show higher female share of employment than their counterparts.
- Trade expands sectors where women work, reduces prices for goods women consume, allows more productive firms to grow, and increases competition that makes discrimination costlier.
- Growth in services, global value chains, and digital trade create new opportunities:
  - Services now create the most jobs earlier in the development process; International Labour Organization statistics show women comprised 46 percent of all services sector workers in 2000, rising to about 58 percent by 2020.
  - Women working in global value chains have a 10 percentage point higher probability of being in the formal workforce than women in sectors not highly integrated.
  - Digital platforms have witnessed a sharp rise in women-owned companies; about half of the entrepreneurs on Alibaba platforms are women, compared with a quarter among all entrepreneurs in China.

### Barriers and distributional issues
- Sectors that are female-intensive—such as food and beverages, and textiles and apparel—on average face higher tariffs on inputs (Chart 2).
- India’s “pink tariff” amounts to 6 percentage points (Mendoza, Nayyar, and Piermartini 2018).
- Nontariff measures (product standards, regulatory measures) represent fixed costs of trading that disproportionately burden small and medium enterprises—often owned by women.
- Small exporters face limited access to trade financing and higher exposure to extortion and physical harassment at the border.
- Tariff structures and trade facilitation can stack the deck against women by increasing input costs and restricting exports.

### Policy recommendations and complementary measures
- Adjust tariff policies that disproportionately affect female-intensive sectors to reduce the “pink tariff.”
- Advance international cooperation on trade policy to close the gender gap in tariffs and on trade facilitation to streamline regulatory requirements for goods to cross the border.
- Implement policies to improve access to education, financial resources, digital technologies, and information to help women maximize benefits from trade.
- Design, coordinate, and complement policies to address specific barriers women face (such as time constraints and limited geographic mobility due to family caregiving roles).
- Complement trade openness with labor market policies to help women acquire new skills or relocate to areas with improving job opportunities.
- Conduct additional studies of the impact of trade on women, which will require more gender-disaggregated data.

### Pandemic and geopolitical impacts
- In 2020, the pandemic crisis destroyed 4.2 percent of women’s employment worldwide (a drop of 54 million jobs), compared with 3 percent for men (a drop of 60 million jobs).
- Women lost $800 billion in income during the pandemic; this figure does not account for wages lost in informal jobs, where women tend to be overrepresented.
- The pandemic disproportionately impacted sectors that tend to employ more women; women bore greater burdens from childcare center and school closures because of greater family caregiving responsibilities.
- Increased investment in digital technologies, spurred by the pandemic, will give women more opportunities to benefit from trade going forward.
- Rising protectionist pressures, global value chain reshaping, and geopolitical tensions threaten to reverse gains in gender equality achieved so far; open trade is essential for a gender-inclusive economic recovery.

### Selected references cited in the unit
- Aiyar, Shekhar, and others. 2023. “Geo-Economic Fragmentation and the Future of Multilateralism.” IMF Staff Discussion Note 23/001, International Monetary Fund, Washington, DC.
- Bateman, Jon. 2022. “US-China Technological “Decoupling”: A Strategy and Policy Framework.” Carnegie Endowment for International Peace, Washington, DC.
- Horn, Sebastian, Bradley C. Parks, Carmen M. Reinhart, and Christoph Trebesch. 2023. “China as an International Lender of Last Resort.” Policy Research Working Paper 10380, World Bank, Washington, DC.
- Lardy, Nicholas R., and Tianlei Huang. 2020. “Despite the Rhetoric, US-China Financial Decoupling Is Not Happening.” China Economic Watch, July 2. Peterson Institute for International Economics, Washington, DC.
- World Trade Organization (WTO). 2023. “One Year of War in Ukraine: Assessing the Impact on Global Trade and Development.” Assessment note, Geneva.
- Rocha, N., and D. Winkler. 2019. “Trade and Female Labor Participation: Stylized Facts Using a Global Dataset.” Policy Research Working Paper 9098, World Bank, Washington, DC.
- Mendoza, Nayyar, and Piermartini 2018 (India “pink tariff” reference).

*Content derived from fd0623 - References: (source PDF content).*

### References:

### fd0623 - References:

### References (listed)
- Ghani, E., and S. D. O’Connell. 2014. “Can Service Be a Growth Escalator in Low-Income Countries?” Policy Research Working Paper 6971, World Bank, Washington, DC.
- Landivar, L., L. Ruppanner, W. Scarborough, and C. Collins. 2020. “Early Signs Indicate That COVID-19 Is Exacerbating Gender Inequality in the Labor Force.” Socius 6: 1–3.
- Mendoza, A., G. Nayyar, and R. Piermartini. 2018. “Are the ‘Poor’ Getting Globalised?” In Trade and Poverty Reduction: New Evidence of Impacts on Developing Countries. World Bank and World Trade Organization.
- Rodrik, D. 2016. “Premature Deindustrialization.” Journal of Economic Growth 21 (1): 1–33.
- World Bank and World Trade Organization (World Bank–WTO). 2020. Women and Trade: The Role of Trade in Promoting Gender Equality. Washington, DC: World Bank. https://www.wto.org/english/res_e/publications_e/women_trade_pub2807_e.htm.

### Globalization’s peak — key findings and metrics
- Trade openness proxy: sum of exports and imports as a share of global GDP.
- Long-run pattern: trade openness index has plateaued on a global level since 2008.
- Recent developments:
  - The metric has receded for some of the world’s largest economies.
  - There has been a significant surge in trade restrictions globally over the past few years.
  - Rising trade tensions between the United States and China, and disruptions following Russia’s invasion of Ukraine, have contributed to fragmentation of financial, food, and energy flows.
  - COVID-19 increased focus on economic security and supply-chain resilience.
- Visual/graphic indicators referenced:
  - Rising restrictions: (number of trade restrictions imposed annually worldwide) with axis markings shown as 0, 1,000, 2,000, 3,000 (graphics source: Global Trade Alert).
- Historical eras of globalization (periodization and characterizations preserved):
  - 1870–1914: Industrialization — dominated by Argentina, Australia, Canada, Europe, and the United States; facilitated by the gold standard.
  - 1914–1945: Wars, Protectionism — reversal due to conflicts and protectionism; regionalization of trade.
  - 1945–1980: Fixed Exchange Rates — Bretton Woods era; U.S. dollar pegged to gold; postwar recovery and trade liberalization.
  - 1980–2008: Liberalization — removal of trade barriers; WTO established in 1995; surge in cross-border capital flows.
  - 2008–2021: “Slowbalization” — slowdown in trade reform and weakening political support for open trade amid geopolitical tensions.
- Data sources cited: Organisation for Economic Co-operation and Development; Our World in Data; World Bank; Jordà-Schularick-Taylor Macrohistory Database; Penn World Data version 10.0; Peterson Institute for International Economics; IMF staff calculations.

### Subsidy wars — analysis, harms, and policy implications
- Definition and rationale:
  - Subsidies described as transfers from government to domestic entities without an equivalent contribution in return; forms include direct grants, tax incentives, favorable financing.
  - Governments use subsidies to achieve strategic objectives, secure supply chains, protect national security interests, correct market failures, or respond to emergencies (example: COVID vaccine subsidies).
- Harms of subsidies (economic and trade-related):
  - Distort prices and production costs; can prevent efficient outcomes and divert resources to less productive uses.
  - Can snuff out innovation, induce rent-seeking behavior, and harm smaller economies unable to subsidize.
  - Can prop up practices harmful to public interest; IMF economists: replacing fossil fuel subsidies with an efficient carbon price could have cut global carbon emissions by 28 percent and air pollution deaths by 46 percent.
  - Distort trade and investment when subsidies include discriminatory provisions (example: local-content requirements), causing supply-chain reconfiguration and market inefficiencies.
  - Undermine benefits of past tariff and market-access negotiations and erode public support for trade.
  - Can trigger retaliatory measures (countervailing duties) and escalate into subsidy wars.
- Limitations of existing international rules:
  - WTO Agreement on Subsidies and Countervailing Measures (SCM agreement) and Agreement on Agriculture set definitions, notification requirements, and remedies.
  - Shortcomings: some state interventions (including those via state-owned enterprises) are not automatically counted as “subsidies” under current definitions; failures to notify the WTO reduce transparency and sow mistrust.
- Recommendations and cooperative responses:
  - Enhance transparency, provide better analysis, and strengthen cooperation to improve subsidy design and limit harmful cross-border spillovers (as proposed in the joint paper “Subsidies, Trade, and International Cooperation” by four international organizations, including the IMF).
  - Improve data and comprehensive analysis of subsidies and their effects to inform policymakers.
  - Encourage multilateral discussion to dial back tit-for-tat subsidy competition and to restore openness and predictability in global trade.

### Partnerships for refugees — operational findings and policy areas
- Scale and drivers:
  - Forcibly displaced population: about 40 million ten years ago; now 103 million and rising.
  - Primary drivers: multiplication of conflicts; other contributors include economic factors, inequalities, demographics, and climate change.
- UNHCR operations and resources:
  - UNHCR works in 137 countries with a workforce of about 20,000 people.
  - Yearly expenditure in the last couple of years: about $6 billion, almost entirely voluntarily funded.
- Policy and institutional approaches:
  - Humanitarian assistance meets immediate needs (food, medicine, shelter) but is not well suited for medium- and long-term needs (education, health care, livelihoods).
  - Strategic partnerships with development institutions (example: World Bank financial instruments within IDA platforms for low-income and middle-income countries) aim to integrate refugees into education and health systems and improve livelihoods and community support.
  - Growing cooperation with financial institutions and development actors; IMF engagement is increasing (staff member on loan advising on forced displacement).
- Vulnerabilities and macroeconomic implications:
  - Inflation raises operational costs and increases fragility of displaced populations and host communities.
  - High refugee numbers can have macroeconomic impacts on host countries; UNHCR seeks IMF consideration of these effects in IMF work for refugee-hosting countries.
- Operational challenges in complex environments:
  - UNHCR operates in territories controlled by entities not recognized internationally and under sanctions; exemptions and arrangements can enable necessary humanitarian operations.
- Policy emphasis:
  - Integrate humanitarian responses with development planning to address medium- and long-term needs and to realize economic benefits from refugee inclusion.

### Population aging — key statistics, risks, and policy recommendations
- Key demographic milestones and projections:
  - Total world population passed the 8 billion milestone on November 15, 2022.
  - Progression from 7 to 8 billion took 12 years.
  - India projected average annual rate of population growth: 0.7 percent during 2020–40.
  - Global average projected population growth: 0.8 percent during 2020–40.
  - India’s 0.7 percent rate is “just half its 2000–20 rate.”
  - UN projections: countries experiencing annual population decline increase from 41 in 2022 to 88 in 2050 (with China included throughout).
  - Global life expectancy: 34 years in 1913 to 72 years in 2022.
  - Between 2000 and 2050, the global share of people 80 and older is expected to quadruple to almost 5 percent.
  - Estimated COVID-19 direct and indirect deaths worldwide during the first two years of the pandemic: 15 million.
- Dominant trend:
  - Population aging (declining fertility, increasing longevity, progression of large cohorts into older ages) is the most pervasive global demographic trend.
- Risks and consequences:
  - Dwindling workforce, constrained capacity to support retirees, explosion of age-related morbidity and health-care costs, declining quality of life among older people without adequate resources.
  - Potential for widespread depopulation in some countries.
- Behavioral and public-health recommendations:
  - Increase physical activity: WHO recommends 150–300 minutes of moderate aerobic physical activity per week for adults ages 18–64; adults 65 and older should augment with balance and strength training three days a week. One in four adults worldwide fails to meet these standards.
  - Adolescent activity: WHO recommendation is 60 minutes a day; more than 80 percent of adolescents fail to meet this.
  - Encourage healthier diets (low in sugar, sodium, saturated fat, and calories) and reduce tobacco and unsafe alcohol consumption.
- Investment and policy measures:
  - Infrastructure: develop healthy, age-friendly spaces; well-ventilated buildings relying on clean fuels; electrified mass transit and access for mobility-constrained older people.
  - Human capital: training and skills programs to sustain per capita growth; encourage workforce participation of underrepresented groups (mothers, older people); invest in primary and secondary education focusing on critical skills and broad-based innovation.
  - Institutional reforms: expand access to quality family planning; allow more choice on retirement age; incentivize individual retirement saving; promote sectors with opportunities for older workers; develop and strengthen long-term-care systems; promote disease prevention and early detection.
  - Migration: relax restrictions to allow labor mobility where jobs exist; over 96 percent of the world’s people still live in their country of birth—scope exists for international migration to relieve demographic pressures. Note risks of magnified “brain drains.”
- Technology and innovation:
  - Health technology (vaccines, wearable monitoring sensors), assistive devices (robots), and information technology (interoperable electronic medical records and population-level data) can support healthy aging.
- Remittances and migration economics:
  - World Bank estimate: lowering remittance fees by 2 percent would result in an annual savings of $12 billion for migrants from lower-middle-income countries (Ratha and others 2022).

*Finance & Development, June 2023 (content unit: fd0623 - References)*

### References:

### fd0623 - References

### References list
- Bloom, D. E. 2020. “Population 2020.” Finance and Development 57 (1).
- Ratha D., E. J. Kim, S. Plaza, E. J. Riordan, and V. Chandra. 2022. “A War in a Pandemic: Implications of the Russian Invasion of Ukraine and the COVID-19 crisis on Global Governance of Migration and Remittance Flows.” Migration and Development Brief 36, KNOMAD–World Bank, Washington, DC.
- United Nations Department of Economic and Social Affairs (UNDESA), Population Division. 2022. World Population Prospects 2022: Summary of Results. New York.
- World Health Organization. 2020. “WHO Fact Sheet: Physical Activity.” Geneva.
- Source: United Nations Department of Economic and Social Affairs, Population Division, World Population Prospects, 2022 Revision.

### Demographic trends: population and aging
- Key finding: Global population has passed 8 billion while the rate of growth continues to decline.
- Chart indicators (as presented):
  - Population (billions) scale shows values: 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and milestones labeled 3bn 4bn 5bn 6bn 7bn 8bn 9bn across years 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050.
  - Growth rate (%) depicted alongside population trajectory.
- Aging population indicators:
  - Total fertility rate, worldwide (births per woman) series values shown: 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8 across years 2000 2010 2020 2030 2040 2050.
  - Life expectancy at birth, worldwide (years of life expectancy) series values shown: 65, 67, 69, 71, 73, 75, 77, 79 across years 2000 2010 2020 2030 2040 2050.

### “Riskless Capitalism” — assessment of the SVB intervention and policy implications
Findings and factual details:
- The US government decision to cover uninsured deposits at Silicon Valley Bank (SVB) is argued to have undermined free market discipline.
- Example corporate exposure cited: Roku had more than $450 million in deposits at SVB, according to Reuters.
- Historical FDIC precedent: past interventions suggest uninsured depositors would have faced about a 10 percent haircut.
- Estimated fiscal implication: FDIC would have saved $20 billion by imposing such a haircut.
- SVB context: SVB was the 16th largest bank in the United States.
- The Federal Reserve’s investigation characterized SVB’s failure as “a textbook case of mismanagement by the bank.”
- Political and lobbying pressures noted, with references to venture capitalists and public figures advocating for protection of deposits.

Policy analysis and recommendations (four conditions cited to support competitive, pro-market outcomes):
- Condition 1: There should be no incumbent businesses that are very powerful; each business must have only modest power so the state can act as an impartial enforcer.
- Condition 2: An effective welfare system to cushion people affected by creative destruction—“Firms should go bust; people should not.” Explicit safety nets reduce politicization of relief.
- Condition 3: Reduce power of incumbents by forcing them to compete with foreign firms—maintain domestic markets open to international competition.
- Condition 4: Persuade the public of the benefits and political fragility of free, competitive markets so the public will resist narrow interest capture.

Additional policy-related observations:
- If uninsured depositors are always protected, moral hazard increases and uninsured depositors will not discipline bank management.
- A government that repeatedly bails out firms loses credibility in future claims that bailouts are exceptional.
- The authors argue for developing metrics of political influence (beyond usual market-dominance metrics) to limit firms’ political power.

### Book review highlights: inflation, small states, and the metaverse
- On inflation (Stephen D. King, We Need to Talk about Inflation):
  - Central thesis summarized: recent inflationary episodes reflect systemic policy problems, including frameworks that bias central banks toward inflation and “quantitative easing” becoming “totally addictive.”
  - Key policy takeaway: “Inflation must be tackled, head-on and without hesitation.” Concerns are raised about central bank independence and the need to remember risks of deflation.
- On small states (DeLisle Worrell, Development and Stabilization in Small Open Economies):
  - Small states are more open and vulnerable to external shocks and typically must specialize in a few internationally competitive products and services.
  - Worrell’s view: pegged exchange rates are often preferable for small states; if an exchange-rate anchor cannot be maintained, adopting a dominant foreign currency as legal tender may be the best alternative.
  - Fiscal policy importance: with limited monetary policy, fiscal prudence, tax administration, debt management, and state-owned enterprise management are central; examples cited include Barbados’ balance of payments crises in 1991 and 2018 addressed by fiscal consolidation under IMF-supported programs.
- On the metaverse (Matthew Ball, The Metaverse: And How It Will Revolutionize Everything):
  - Economic context and scale assertions preserved as presented:
    - Gaming described as a “$180 billion leisure industry.”
    - Metaverse posited as poised to “alter the $95 trillion world economy.”
    - Market participation metrics cited: “some 75 percent of American children now playing on a single gaming platform, and 140 million potential gamers born each year.”
  - Policy implication: calls for governance and standards for the metaverse similar to internet protocols; regulatory action suggested to address smartphone platform constraints (Google and Apple) on payments and app stores.

### Currency and national identity: Commonwealth banknote changes
Findings and developments:
- The passing of Queen Elizabeth II in 2022 has prompted debate in Commonwealth realms about featuring the new monarch on currency notes.
- United Kingdom: new banknotes featuring King Charles III will enter circulation in 2024 alongside existing notes bearing Queen Elizabeth’s likeness.
- Australia: the Reserve Bank of Australia is embarking on consultation with First Australians on a new five-dollar note design replacing the queen’s image; rollout will take at least a few years.
- New Zealand and Canada: central banks report it will be “several years” before the new monarch replaces the queen on $NZ 20 notes and Canadian notes, respectively.
- Barbados: two years ago (relative to the publication), Barbados cut the last of its ties with the monarchy and elected a Barbadian head of state; the queen had been replaced earlier on its banknotes.
- The Bahamas: the Central Bank released a new B$100 bill in 2021 replacing the queen’s image with former Deputy Prime Minister Arthur Dion Hanna; the queen’s likeness remains on the half-dollar and three-dollar notes with no immediate plans to replace them.
- Jamaica: removed the monarch from its currency in 1969 and is planning a referendum on electing their head of state.
- Broader observation: currency imagery is framed as a symbol central to national identity and part of broader reassessments of colonial history, slavery, and racism.

*Source: fd0623 - References*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2023/june/fd0623.pdf_