CPB Netherlands Bureau for Economic Policy Analysis Global trade Is the post-crisis slow-down the new normal? Paul Veenendaal

CPB Netherlands Bureau for Economic Policy Analysis Storyline Next year’s global trade growth forecasts too optimistic since 2010 Fall in commodity prices hurts emerging economies Trade slowdown mainly due to post-crisis slump Trade growth may attain pre- crisis levels when commodity prices recover and Europe continues its upward path

CPB Netherlands Bureau for Economic Policy Analysis OECD forecasts of global trade growth since October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Slowdown of global trade compared to global gdp 22 October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Recent global gdp and trade growth forecasts 22 October 2015 OECD STEP Here we go again: lowering next year’s global trade forecast Reasons: – declining goods trade in first two quarters of 2015 (CPB WTM) – growth slowdown in emerging economies, partly due to falling raw material prices Global GDPGlobal Trade EO97June CPBSeptember WEOOctober STEP98October2.03.5

CPB Netherlands Bureau for Economic Policy Analysis Commodity prices are still declining 22 October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Global trade slowdown; two alternative views 22 October 2015 OECD STEP It’s structural and there to stay – integration of central/eastern Europe and China in the world economy is completed – globalisation of production has matured – thus: the high rates of trade growth from mid 1980’s till mid 2000’s won’t come back It’s cyclical and to disappear once the aftermath of the Great Recession is over – since the Great Recession demand is weak – due to the necessity to reinforce balances and to reduce public deficits and debts – demand is finally starting to rise in the euro area – if this rise gains momentum global trade growth will increase Cf. Hoekman, B. (ed.), 2015, The Global Trade Slowdown: A New Normal?, CEPR/VoXEU

CPB Netherlands Bureau for Economic Policy Analysis Globalisation finished? Imports in exports (%), , from WIOD 22 October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Ratio of global trade to gdp growth declines after global downturns 22 October 2015 OECD STEP From: Ollivaud, P. and C. Schwelnuss (2015), Does the Post-Crisis Weakness of Global Trade Solely Reflect Weak Demand?, OECD EDWP 1216

CPB Netherlands Bureau for Economic Policy Analysis EU imports in exports for investment and consumption, WIOD 22 October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Conclusions 22 October 2015 OECD STEP The main cause for the global trade slowdown is cyclical A persistent EU recovery may provide a boost to global trade – EU has a relatively high trade to gdp ratio A return to pre-crisis investment ratio’s will boost trade as well as investment is more trade-intensive than consumption The growth slowdown in emerging economies affects world trade growth negatively – about 45% of value added exports has emerging economies as final destination (for other East-Asia the share is 60%) A recovery of raw material prices will foster growth in emerging economies and promote global trade If all this would take place the STEP estimate of 3.5% global trade growth next year might well be too low

CPB Netherlands Bureau for Economic Policy Analysis Value added exports to final destinations in advanced and emerging economies, 2011, WIOD 22 October 2015 OECD STEP

CPB Netherlands Bureau for Economic Policy Analysis Global goods trade and global total trade (NA) 22 October 2015 OECD STEP