A sharp drop in global trade growth this year is underscoring a disturbing legacy of the financial crisis: Exports and imports of goods are lagging far behind the pace during past expansions, threatening future productivity and living standards.
The Wall Street Journal reports that for the third year in a row, the rate of growth in global trade is set to trail the already sluggish expansion of the world economy, according to data from the World Trade Organization and projections from leading economists. Before the recent slump, the last year trade underperformed during an economic expansion was 1983.
“We have seen this burst of globalization, and now we’re at a point of consolidation, maybe retrenchment,” says WTO chief economist Robert Koopman. “It’s almost like the timing belt on the global growth engine is a bit off or the cylinders are not firing as they should.”
Since rebounding sharply in 2010 after the financial crisis, trade growth has averaged only about 3% a year, compared with 6% a year from 1983 to 2008, the WTO says.
Economists blame the slowdown on many factors, from China’s shift away from certain kinds of manufacturing to a decline in international investment. They also point to a dearth of new big trade agreements and trade barriers erected after the 2008 downturn, as well as a newfound reluctance by companies to source products and components far from home.
Few see any signs that trade will soon regain its previous pace of growth, which was double the rate of economic expansion before 2008. In 2006, global trade volumes grew 8.5%, compared with a 4% expansion in global GDP.
This year the WTO is expected to cut its 2015 trade forecast a second time after a sudden contraction in the first half of the year—the first such decline since 2009.
Much of the slowdown comes from the sluggish performance of emerging economies, including China, compared with their brisk growth in prior decades. The shift has prompted economists to wonder whether the prolonged burst of trade-driven globalization is over.
“It’s fairly obvious that we reached peak trade in 2007,” says Scott Miller, trade expert at the Center for Strategic and International Studies, a Washington, D.C., think tank.
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