OECD Economic Policy Papers
The OECD Economic Policy Papers series is designed to make available selected studies on structural and macro-economic policy issues of current interest. The Papers are produced in the context of the work carried out on the two regular OECD titles, OECD Economic Outlook and Going for Growth.
- ISSN: 2226583X (online)
- https://doi.org/10.1787/2226583X
Cardiac Arrest or Dizzy Spell
Why is World Trade So Weak and What can Policy Do About It?
World trade growth was rapid in the two decades prior to the global financial crisis but has halved
subsequently. There are both structural and cyclical reasons for the slowdown. A deceleration in the rate of
trade liberalisation post 2000 was initially obscured by the ongoing expansion of global value chains and
associated rapid emergence of China in the world economy. Post the financial crisis global value chains
started to unwind and, possibly associated with this, Chinese and Asian trade weakened markedly. These
structural changes were compounded by insipid demand due to anaemic growth of global investment, as
well as intra-euro area trade, both of which are trade intensive. The slowdown in world trade growth post
crisis, if sustained, will have serious consequences for the medium-term growth of productivity and living
standards. Trade policy has significant potential to reinvigorate trade growth but the political environment
for reforms is difficult, with a growing polarisation of OECD electorates into pro- and anti- globalisation
supporters. Further trade and investment policy liberalisation should be introduced as part of a wider
package of structural reforms to spread the benefits of freer trade and investment more widely.
Keywords: trade policy, global value chains, Slowdown, GVCs, world trade
JEL:
F02: International Economics / General / International Economic Order and Integration;
F01: International Economics / General / Global Outlook;
F14: International Economics / Trade / Empirical Studies of Trade;
F15: International Economics / Trade / Economic Integration;
F17: International Economics / Trade / Trade: Forecasting and Simulation;
F13: International Economics / Trade / Trade Policy; International Trade Organizations;
F62: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Macroeconomic Impacts;
F21: International Economics / International Factor Movements and International Business / International Investment; Long-Term Capital Movements
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