Question #4: Global Infrastructure Connectivity Alliance (GICA)

Q4: The chicken or the egg: What matters more — the impact of trade on connectivity, or the impact of connectivity on trade?

Although this question appears at first glance rather tautological, it reflects a much deeper complexity of the relationships between trade and connectivity; which one is the main driver? Short answer; it depends on the existing connectivity endowments. For low levels of connectivity, it is likely to be connectivity improvements that would drive trade growth while for regions having higher connectivity levels, it is more likely that trade is the driver.

As documented by UNCTAD, the balance of global trade flows has substantially changed with globalization, with developing economies becoming major exporter of goods. This is reflective of an evolution in their respective levels of connectivity.

Changes in Global Trade Flows

Further, differences in connectivity are associated with inequalities in levels of development. Initially, this was to the advantage of advanced economies that developed economies of scale first, but with growing levels of connectivity, comparative advantages have counterbalanced the benefits of economies of scale.

Trade, Connectivity and Spatial Inequalities