Trade in value terms has grown exponentially since the late 1970s, roughly doubling every 10 years between then and 2000, and then shooting up by 2.5 times between 2000 and 2008, the beginning of the financial crisis.1 Trade declined almost 25 percent during the financial crisis.
Despite an initial rebound after the financial crisis ended, trade declined again in 2014, this time by about 15 percent. Thus, after about 20 years of relatively steady growth, trade trends in value terms became much more variable after 2000 (Chart).
In order to strip away the effect of prices, especially commodity prices, to get to a proxy for trade volumes, we calculated our own global export series in real dollar terms and include a GFG projection for 2017.2 In contrast to the volatility in nominal dollar trade, trade volumes grew at relatively high rates until the financial crisis — 7 percent average annual rates in the 1980s and 8 to 10 percent average annual rates after 1990.
Notably, global trade tended to be a stabilizing force during global recessions, acting as either a neutral or a positive contributor to the global economy. The financial crisis was the first time that trade volumes declined during a recession.
Since the financial crisis, trade volumes have slowed to about one-half to one-third of their pre-crisis growth rate. The slowdown in real dollar trade appears to be explained by slow global growth, recessions in Europe and emerging markets, low credit growth, weak business investment, and China restructuring rather than by changes in trade institutions or rules.
A recent European Central Bank report, Understanding the Weakness in Global Trade, expands on a range of structural changes in the global economy and argues that the recent slowdown in global trade is likely to persist.3 Strikingly, in these post-crisis years of slow global trade growth, new bilateral free trade agreements and other focused trade negotiations have continued to push tariffs down and expand national markets.
1 When trade is discussed quantitatively in this report it refers to the value or volume of merchandise goods trade and excludes services trade unless otherwise noted.
2 Real U.S. dollar global export values were calculated using the OECD producer price index for manufacturers for all OECD countries to establish a base year real value for 1980. The real U.S. dollar series was then calculated using the rate of change time series for world trade volumes provided by the World Bank database. The GFG Estimated Real Exports value series is intended to show the trends in real and nominal values rather than a specific estimate of the real value of export volumes in any one year.
3 Task Force of the International Relations Committee. “Understanding the Weakness in Global Trade — What Is the New Normal?” Occasional Paper Series No 178 (2016). European Central Bank, Frankfurt Am Main, Germany.
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