Source: WTO, Table A-1. Recession data from National Bureau of
Changes in the Value World's Merchandise Trade, Production and GDP,
1950-2012 (in %)
The growth rates of the world GDP and merchandise production have
a very high level of concordance (R=0.91). However, total merchandise trade is
subject to significant fluctuations linked with commodity prices, business
cycles and periods of growth and recession. Periods of decline in
world trade are all
corresponding to recessions, such as 1981-82, the Asian Financial crisis
of 1997, the recession of 2001 and the financial crisis of
2008-2009. Commodity price fluctuations, particularly
products and minerals (fossil fuels), are the factors contributing the
most to changes in merchandise trade. The level of association between
trade and production is much lower (R=0.38), particularly in recent
decades as many manufacturing activities were offshored to lower costs
locations. Thus, without additional demand, the relocation of a factory
from one part of the world to another can be considered as a zero sum
game from a production standpoint, but from a trade standpoint it results
in additional flows. However, relocation commonly results in lower costs,
which are likely to trigger additional demand. Trade has consequently
grown at least 3 times as much as production between 1950 and 2010, underlining
that economies are increasingly interdependent. Still, a growing divergence
is noted and which took place in three phases:
Once globalization will reach maturity, implying modest growth
levels in trade, it is quite possible that
commodity prices would again become the main factor of divergence
between trade and economic output.
- Before 1970. Until the 1970s, the growth of trade, GDP and
production was quite similar, underlining that globalization was
still in its early stages and mostly involving finished goods
and raw materials.
- Between 1970 and 1985. The first significant divergence
took place in the 1970s and was mainly related with the first two
oil shocks that resulted in significantly higher energy prices and
the corresponding surge in the value of total merchandise trade.
This divergence was therefore driven by commodity prices.
- After 1985. The second divergence took place after 1985
and was mainly linked with the emergence of an international
division of production with the setting of manufacturing activities in developing countries.
This divergence was driven by the setting of global production networks
and supply chains.