An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release

The deceleration of world trade since 2011 has been widely discussed. How much is due to a reversal of international production fragmentation? And how much is due to decreasing demand for trade-intensive goods? The authors present a consistent framework that quantifies their relative importance. A central concept in the approach chosen here is the global import intensity (GII) of production. This is a novel measure of fragmentation tracing the imports needed in all stages of production. The authors study the period before and after the great trade collapse based on an update of the world input-output database (WIOD). The increase in GII during the period 2000-2008 was due to a combination of two forces: high demand for goods, and continuous international production fragmentation. Since 2011 fragmentation halted. Moreover, demand shifted to services which are less trade-intensive than goods, particularly in China. The authors argue that lower trade ratios are likely to remain in the near future.

A video summing up the main conclusions of the article can be found here. 

Comment from our editors:

This article provides a complete framework of global trade, by taking an interesting approach with the GII indicator, allowing the use of complete data on the whole production chains of various countries and sectors. Thanks to the World Input-Output Database, the authors have been able to consider not only the final stage of production, but also the intermediates between 2000 and 2014. 

Even though the article has been published in 2017, the conclusions of the authors on the slowdown of world trade are up to date as the Covid-19 pandemic and the war in Ukraine have hit the world and largely affected the exchanges. As the economic systems rely on trade, it is important to understand how changes in the structures of production and demand affect the relationship between countries and how these changes affect trade in return. Therefore, the slowdown of trade that started in 2011 seems to continue up to today. 

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