Global Trade: What s Behind the Slowdown?

Transcription

1 Global Trade: What s Behind the Slowdown? Aqib Aslam, Emine Boz, Eugenio Cerutti, Marcos Poplawski-Ribeiro, and Petia Topalova with support from Ava Hong, Hao Jiang, Olivia Ma, Rachel Szymanski, and Hong Yang. 1

2 Motivation World Real Trade and GDP Growth in Historical Perspective (Percent) World Import growth GDP growth Sources: IMF staff calculations. Note: Imports include goods and services. 2

3 Motivation World Real Trade and GDP Growth in Historical Perspective (Percent) World Import growth Average GDP growth GDP growth Sources: IMF staff calculations. Note: Imports include goods and services. 3

4 Motivation World Real Trade and GDP Growth in Historical Perspective (Percent) World Import growth Average import growth GDP growth Average GDP growth Sources: IMF staff calculations. Note: Imports include goods and services. 4

5 Motivation World Real Trade and GDP Growth in Historical Perspective (Percent) World Import growth GDP growth Average import growth Average GDP growth Sources: IMF staff calculations. Note: Imports include goods and services. 5

6 Outline How widespread is the slowdown? What are its drivers? How much of the slowdown is a symptom of the weak recovery and shifts in the composition of economic activity? What role have other factors played? What are its policy implications? 6

7 HOW WIDESPREAD IS THE SLOWDOWN?

8 Slowdown in real trade growth is widespread across countries and products Average Real Import Growth (Percentage points; difference between 23 7 less ) Distribution of Average Real Import Growth across Products (Percent) Density Volume growth Sources: United Nations Comtrade; and IMF staff calculations. Density Volume growth 8

9 Services trade is more resilient than goods trade; among goods, capital goods slowed down the most. World Real Goods and Services Import Growth Real Goods Import Growth of Different Product Groups 1 (Percent) Goods Services (Percent) Capital Primary intermediate Durable consumption Processed intermediate Nondurable consumption Sources: United Nations Comtrade; and IMF staff calculations. 1 Computed using import volume indices constructed from quantity and value trade data at HS 6-digit level for 52 economies. 9

10 WHAT ARE ITS DRIVERS?

11 Research Design Role of Activity and its Composition Role of Other Factors Empirical Estimation of Import Demand Multicountry, Multisector General Equilibrium Model Empirical Analysis of Disaggregated Sectoral/Product Import Volumes 11

12 Research Design Role of Activity and its Composition Role of Other Factors Empirical Estimation of Import Demand Multicountry, Multisector General Equilibrium Model Empirical Analysis of Disaggregated Sectoral/Product Import Volumes 12

13 Actual import growth post-212 is consistently lower than predicted by empirical import demand models Actual and Predicted Evolution of Real Import Growth (Percent) 3 Predicted based on domestic and partner s domestic import-intensity-adjusted demand Predicted based on import-intensity-adjusted demand Predicted based on domestic import-intensity-adjusted demand Actual 1. Real Goods Imports: Full Sample 3 2. Real Services Imports: Full Sample Source: IMF staff calculations

14 but missing trade is small relative to total decline. Difference between Actual and Predicted Growth of Real Goods Import (Percent) Source: IMF staff calculations. 14

15 Three-fourths of the slowdown can be attributed to the weakness in domestic absorption. Decomposing the Slowdown in Real Goods Import Growth (Percent) Source: IMF staff calculations. Note: Bar A decomposes the difference in average real goods import growth between the two periods into portions predicted by consumption and relative prices, investment, exports, and an un unpredicted residual. Bar B apportions the component predicted by exports into what can and cannot be predicted by domestic demand from trading partners, using an iterative procedure. Bar C decomposes the difference into the sum of domestic demand and external demand predicted by trading partners domestic demand. 15

16 Research Design Role of Activity and its Composition Role of Other Factors Empirical Estimation of Import Demand Multicountry, Multisector General Equilibrium Model Empirical Analysis of Disaggregated Sectoral/Product Import Volumes 16

17 Shifts in demand composition account for most of the slowdown but trade costs are important in EMDEs. Change in the Gross Growth of Nominal Imports-to-GDP Ratio (Percentage Points) between and 23-7 Advanced Economies Emerging Market and Developing Economies Sources: Eora Multi-Region Input-Output database; United Nations Comtrade; and IMF staff calculations. 17

18 Role of Weak Recovery and Shifts in the Composition of Demand Import demand estimation and the structural general equilibrium model deliver consistent messages. Slowdown reflects largely, but not entirely, the weakness of the overall economic environment and compositional shifts in aggregate activity. Demand composition shifts played a larger role in the slowdown in AEs trade, relative to EMDEs. There is a role for other factors, including trade costs.

19 Research Design Role of Activity and its Composition Role of Other Factors Empirical Estimation of Import Demand Multicountry, Multisector General Equilibrium Model Empirical Analysis of Disaggregated Sectoral/Product Import Volumes 19

20 Trade liberalization slowed down, and there are signs that protectionism is on the rise. Tariffs in Advanced Economies (Percent; simple average) Tariffs in Emerging Market and Developing Ec (Percent; simple average) Start of Uruguay Round Establishment of WTO Start of Uruguay Round Establishment of WTO Sources: United Nations Conference on Trade and Development Trade Analysis and Information System; World Trade Organization Tariff Download Facility; and IMF staff calculations. 2

21 Trade liberalization slowed down, and there are signs that protectionism is on the rise. Free Trade Agreements by Year of Signature 5 (Number) Free Trade Agreements Coverage p g y ) 5 Average number of trading partners 4 Percent of global GDP (right scale) Sources: Design of Trade Agreements database; World Trade Organization Regional Trade Agreements database; and IMF staff calculations. 21

22 Trade liberalization slowed down, and there are signs that protectionism is on the rise. Temporary Trade Barriers (Percent of products) Antidumping Countervailing Duties Safeguards Temporary Trade Barriers Measures Implemented (Number of products, thousands) 8 Discriminatory Liberalizing Net Measures Sources: Bown 216; Global Trade Alert database; World Bank Temporary Trade Barriers database; and IMF staff calculations. 22

23 Participation in global value chains plateaued. The Evolution of Global Value Chain Participation GGGGGG PPPPPPPPPPPPPPPPPPPPPPPPPP = DDDDDD + FFFFFF GGGGGGGGGG EEEEEEEEEEEEEE (Percent) 7 Advanced Economies Emerging Market and Developing Economies excluding China China DVX (export perspective) = exported domestic value added that enters as an intermediate input in the value added exported by other countries. FVA (import perspective) = (foreign) value added that has been generated abroad and imported Sources: Eora Multi-Region Input-Output database; and IMF staff calculations. 23

24 These factors are weighing on trade growth, although their quantitative contribution is limited. Contribution of Trade Policies and Global Value Chains to the Slowdown in Real Goods Import Growth (Percent) The slowdown in goods trade is largely predicted by the weakness in the importintensive components of demand, such as investment. Trade policies and global supply chain participation also played a (more limited) role in the slowdown Unpredicted Source: IMF staff calculations. Predicted by IAD -1.8 Unexplained Global value chain participation Trade policies 24

25 OUTLOOK AND POLICY IMPLICATIONS

26 What do our findings mean for the outlook for global trade? Slow global trade will likely persist in the medium term as long as global activity and investment remain weak. Even when activity gathers momentum, trade is unlikely to return to the growth rates seen before the financial crisis. Pre-crisis period was characterized by unusually high investment growth in EMDEs. Global value chains developed rapidly. 26

27 Keeping the Wheels of Trade in Motion Policies to boost economic growth, especially investment, can also help trade recover. But the role of trade policy should not be underestimated. Protectionist measures have contributed to the slowdown at the margin and should be avoided so as not to exacerbate the slowdown. Reviving trade liberalization process and reducing man-made trade costs will help. The appropriate policy response to the decline in GVC growth is less clear-cut ( natural or man-made)? Policies must be accompanied by measures to mitigate the adjustment costs associated with greater trade integration. Benefits can be shared more widely and a stronger case can be made to an increasingly skeptical public. 27

28 Global Trade: What s Behind the Slowdown? Aqib Aslam, Emine Boz, Eugenio Cerutti, Marcos Poplawski-Ribeiro, and Petia Topalova with support from Ava Hong, Hao Jiang, Olivia Ma, Rachel Szymanski, and Hong Yang. 28