World Merchandise Trade, 1960-2022

World Merchandise Trade 1960 2022

Source: WTO and World Bank. Current USD.

Global trade has grown in absolute and relative terms, especially after 1990, when global exports surged in the wake of rapid industrialization in developing economies and the massive offshoring of manufacturing, particularly in China. The value of global exports first exceeded $US 1 trillion in 1977, and by 2008, more than 16 trillion current US dollars of merchandise were exported. During the same time period, the share of the world GDP accounted for by merchandise trade, imports, and exports combined, surged from 18% to 52%. This trend is correlated with a growth in volumes handled by international transportation, particularly container shipping. Yet, this fast growth is skewed by the international division of production, where parts can be traded several times before an assembled good is ready for final consumption. This is particularly the case for countries having a high level of economic integration, such as NAFTA (Canada, the United States, and Mexico) or the European Union.

The growth of exports is indicative of a cycle where trade emerged (up to the 1980s), accelerated (1980-2000), and reached peak growth (2000-2008). Growth in trade was also accompanied by a surge in trade imbalances. The entry of China into the WTO in late 2001 significantly impacted global trade, which accelerated due to an expansion of Chinese exports. Eventually, a phase of maturity in global trade will be reached. The financial crisis of 2008-2009 was accompanied by a significant decline in global merchandise trade, close to 25% in just one year. The main factor behind this decline was a drop in the consumption of durable goods (e.g. furniture, appliances, cars) since consumers can postpone these purchases if uncertain about the future. Trade bounced back afterward, mainly driven by emerging economies.

However, since 2012 a peaking in global trade has been observed, with the value of export leveling and its share of the global GDP declining. Even if the Covid-19 pandemic had a negative impact on global trade in 2020, in 2021, trade surged in part because of deferred demand and massive stimulus policies.