Global trade should expand more slowly over the next decade than it did in the 30 years before the financial crisis, the World Bank said Wednesday, citing forecasts for slower economic growth and longer-term shifts in trade patterns.
For the three decades leading up to the global financial crisis of 2007-09, trade had expanded at a steady clip of about 7 percent a year.
But trade growth levels have fallen to about half that for the past two years, and they should rise to only 5 percent or so per year over the medium term, four World Bank economists said in an essay.
International trade helped the global economy tide over rough spots in the two decades before the financial crisis, when it grew nearly twice as fast as economic output. But recent data show the trade engine is running out of steam.
The authors point to the lackluster recovery from the financial crisis, which the World Bank expects to persist. And data show import demand levels may be a fifth lower than they would be otherwise, even five years after an economic crisis.
Weak spending on investment since the crisis, especially in the eurozone, has also sapped trade growth. Investment is especially reliant on imports compared with other economic drivers like consumption and government spending.
But deeper factors have also tamped down trade expansion.
China's reduction of trade barriers and the fragmentation of production into global supply chains boosted trade at the end of the last century, factors that would be hard to replicate now.
Countries like the United States and China are also making more inputs for final products closer to home, the economists write.
"Global trade is growing more slowly not only because world income growth is lower, but also because trade has become less responsive to income growth," according to the essay.
Policymakers are hoping far-reaching regional and global trade pacts could help trade growth regain some lost momentum.
The World Bank said more integration of South Asia, sub-Saharan Africa and South America into global supply chains would also help.
"Drawing these parts of the world into a finer division of labor could lend renewed dynamism to trade," the bank said.