## The Future of Global Trade ## Source details **Canonical URL:** [The Future of Global Trade](https://www.imf.org/en/publications/fandd/issues/2019/06/the-future-of-global-trade-goldberg) ## Other formats - [Markdown version](/en/publications/fandd/issues/2019/06/the-future-of-global-trade-goldberg/index.md) - [Structured JSON version](/en/publications/fandd/issues/2019/06/the-future-of-global-trade-goldberg/index.json) - [Bundle manifest](/en/publications/fandd/issues/2019/06/the-future-of-global-trade-goldberg/bundle-manifest.json) ## Bibliographic details - Authors: PINELOPI GOLDBERG - Published: June 1, 2019 --- ### Overview - Author: PINELOPI K. GOLDBERG, Elihu Professor of Economics and Global Affairs and affiliate of the Economic Growth Center at Yale University. - Publication: F&D Magazine, The Future of Trade, June 2019. - Core question: Does the recent rise of protectionism signify the end of the open, rules-based trading system, or can policy and reform rescue it? - Context: The 75th anniversary of the Bretton Woods multilateral institutions coincides with pronounced doubts about multilateralism and the functioning of the current trading system. ### Structural factors behind the trade slowdown - Trade never regained its pre-2008 momentum after the global financial crisis; trade collapsed during the global financial crisis and world economy recovery was slow. - Two dominant structural explanations cited: - (1) The rebalancing of the Chinese economy and associated increase in China’s domestic value added. - (2) The belief that the fragmentation of production has run its course, leaving limited scope for further international specialization (Hoekman 2015; Constantinescu, Mattoo, and Ruta 2016). - Evidence on China: - China experienced a pronounced decline in its domestic value added of exports until 2011 (with a short interruption during the financial crisis), and since 2011 domestic value added in China has been steadily increasing. - Only Korea exhibits the same trend as China—an increase in domestic value added after 2011. - Two consequences of changing fragmentation for measured trade: - Trade is measured in gross terms, so higher fragmentation/global-value-chain participation implies more trade because of double-counting of inputs crossing borders. - A decline in fragmentation and global-value-chain transactions will translate to less trade in gross terms. - Evidence on fragmentation more broadly: - Exports of intermediate products (value basis) exhibited strong growth until 2013, with a short disruption during the global financial crisis, but declined steadily between 2013 and 2016 (Chart 2 referenced). - An alternative measure—the share of parts and components in volume terms in manufacturing trade—has increased at a moderate pace since the 1990s and has not shown signs of reversal since the global crisis. - Within electronics (with a 40 percent share in parts and components trade): the share of parts and components trade relative to total trade decreased for office machinery and computers, but rose for telecommunications equipment. - Global value chains are still expanding in terms of product and country coverage as measured by the number of product-country combinations, net of new products (Gaulier, Sztulman, and Ünal 2019). - On automation and AI: - Arguments that automation and artificial intelligence will lead to onshoring and less trade have not found empirical support; evidence suggests these advances may boost productivity and lead to more trade. - Conclusion from structural analysis: - Trade growth in parts most associated with fragmentation does not show clear signs of a slowdown. If a slowdown is not inevitable, policy can play a key role in shaping the future of trade. - Indicator of waning liberalization appetite: - The number of new regional trade agreements in 2018 fell to its lowest level since the early 1990s. ### Sources of dissatisfaction with the current trading system and implications for reform - Distributional concerns and political economy: - Increasing inequality within advanced economies has contributed to receptiveness to protectionism. - Evidence that gains from globalization were not shared equally; some countries (particularly in Africa and Latin America) were left behind. - Perceived unfairness and rule concerns: - Complaints about state subsidies, intellectual property rights, forced technology transfer, and exchange rate manipulation. - Divergent views on the effectiveness of the present dispute settlement mechanism, the reach of subsidy disciplines, and treatment of state-owned enterprises. - Institutional constraints: - The WTO’s traditional all-or-nothing approach has become a straightjacket: the Kennedy Round took four years, the Doha Round (started in 2001) is considered stalled. - Near-global membership and reach make consensus increasingly hard to achieve. - Flexible approaches and examples: - Plurilateral agreements among subsets of like-minded countries offer a second-best alternative when multilateral deals are not feasible; they remain in principle open to other WTO members later. - Example: Information Technology Agreement, originally signed in 1996 and expanded in 2016, where 53 members agreed to tariff cuts applied to all WTO members. - Example: Trade Facilitation Agreement adopted in 2013, which unbundled specific issues (improving customs practices) from broader initiatives. - These two agreements illustrate the effectiveness of a more flexible WTO approach. ### New substantive negotiating focuses - The digital revolution has altered trade dynamics: - Firms operate as links in global value chains across multiple countries; many services (banking, insurance) can be purchased cross-border; e-commerce is increasingly important. - Policy implications: - Growth in these areas requires addressing “behind the border” measures: harmonization of domestic regulations; agreement on intellectual property rights protection; consensus on data and privacy issues. - Cross-national regulatory differences may reflect valid concerns (quality standards, exploitation of market power, data privacy); policymakers must balance legitimate domestic regulation against protectionist abuse. - Trade policy alone is insufficient; regulatory cooperation and coordination are needed. - Likely loci of cooperation: - Cooperation to spur growth in trade, especially in services, seems more likely among economies at similar stages of development with similar objectives. - Regional trade agreements could serve as a useful starting point and complement to multilateral platforms. ### Key takeaways and policy implications - Multilateralism remains valuable: a rules-based, predictable trading system contributed significantly to trade and trade-induced growth, especially in Europe and east Asia. - Challenges: - Not everyone benefited equally from globalization; protectionist pressures and dissatisfaction with WTO processes are rising. - Structural changes—especially China’s rebalancing and changes in fragmentation—affect aggregate trade growth. - Opportunities for reform: - More flexible WTO strategies (plurilateral agreements, issue-specific multilateral deals) have shown effectiveness (e.g., Information Technology Agreement expansion in 2016; Trade Facilitation Agreement in 2013). - Policy can shape the future of trade; regulatory cooperation, targeted plurilateral or regional initiatives, and addressing digital-era trade frictions are priorities. - Final assessment: - International trade is not doomed to a permanent slowdown. Its future will crucially depend on the policy choices made amid high uncertainty and backlash against globalization. *Source: The Future of Global Trade – F&D | The IMF at 75* --- ## Content in this bundle - **مستقبل التجارة** - [مستقبل التجارة (Markdown version)](/-/media/files/publications/fandd/article/2019/june/ar/goldberg.pdf.md){rel="alternate" type="text/markdown"} - [مستقبل التجارة (PDF)](/-/media/files/publications/fandd/article/2019/june/ar/goldberg.pdf){rel="external" type="application/pdf"} - **L’avenir du commerce mondial – F&D | Le FMI a 75 ans** - [L’avenir du commerce mondial – F&D | Le FMI a 75 ans (Markdown version)](/-/media/files/publications/fandd/article/2019/june/fr/the-future-of-global-trade-goldberg.pdf.md){rel="alternate" type="text/markdown"} - [L’avenir du commerce mondial – F&D | Le FMI a 75 ans (PDF)](/-/media/files/publications/fandd/article/2019/june/fr/the-future-of-global-trade-goldberg.pdf){rel="external" type="application/pdf"} - **Будущее торговли – Финансы и развитие – июнь 2019 года** - [Будущее торговли – Финансы и развитие – июнь 2019 года (Markdown version)](/-/media/files/publications/fandd/article/2019/june/ru/the-future-of-global-trade-goldberg.pdf.md){rel="alternate" type="text/markdown"} - [Будущее торговли – Финансы и развитие – июнь 2019 года (PDF)](/-/media/files/publications/fandd/article/2019/june/ru/the-future-of-global-trade-goldberg.pdf){rel="external" type="application/pdf"} - **The Future of Trade - June 2019 | FINANCE & DEVELOPMENT | International Monetary Fund** - [The Future of Trade - June 2019 | FINANCE & DEVELOPMENT | International Monetary Fund (Markdown version)](/-/media/files/publications/fandd/article/2019/june/the-future-of-global-trade-goldberg.pdf.md){rel="alternate" type="text/markdown"} - [The Future of Trade - June 2019 | FINANCE & DEVELOPMENT | International Monetary Fund (PDF)](/-/media/files/publications/fandd/article/2019/june/the-future-of-global-trade-goldberg.pdf){rel="external" type="application/pdf"} - **贸易的未来 - 金融与发展 - 国际货币基金组织季刊** - [贸易的未来 - 金融与发展 - 国际货币基金组织季刊 (Markdown version)](/-/media/files/publications/fandd/article/2019/june/zh/the-future-of-global-trade-goldberg.pdf.md){rel="alternate" type="text/markdown"} - [贸易的未来 - 金融与发展 - 国际货币基金组织季刊 (PDF)](/-/media/files/publications/fandd/article/2019/june/zh/the-future-of-global-trade-goldberg.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2019/06/the-future-of-global-trade-goldberg_