1. Towards deeper trade integration: The global trade slowdown & opportunities for Brazil
Mark Dutz, Trade & Competitiveness, The World Bank
CINDES and CDPP Workshop, July 15, 2016
Based on research by Aaditya Mattoo, Cristina Constantinescu and Michele Ruta,
including World Bank Policy Research Working Papers No (2015) and 7673 (2016); and a presentation by Aaditya Mattoo to DFID UK, June 2016

2. Outline
What is happening to global trade?
Why?
What are opportunities for Brazil?

3. Main messages The global trade slowdown may be explained in part by:
maturing of manufacturing GVCs, services trade remains robust
the declining pace of goods trade liberalization
Possible opportunities for Brazil:
new demand for exports from China’s rebalancing
learning from new services imports & exports driven by services trade resilience & further services liberalization
countering the shift in trade policy attitudes against deeper integration (as suggested by Brexit) by becoming a forceful advocate/champion of deeper trade integration

4. What is happening to global trade?
Question 1
What is happening to global trade?

5. Trade share in GDP levelled off before great recession
Total imports (goods + services) as share of GDP have been relatively flat, especially in China and the US, both pre- and post-crisis

6. Why has global trade slowed down?
Question 2
Why has global trade slowed down?

7. The trade slowdown is due to manufacturing
Goods slowed down rather than services…
… due to a slow down in manufacturing rather than commodities

8. Declining pace of goods trade liberalization also played role in trade slowdown
Average applied tariffs in advanced economies and emerging and developing economies (percent)
Source: UNCTAD TRAINS. *Simple averages of MFN Applied and Preferential tariffs
Note: The data for tariffs does not pertain to a consistent sample of countries over time.
Faster trade liberalization in the 1990s relative to the 2000s

9. What are opportunities for brazil?
Question 3
What are opportunities for brazil?

10. Potential rebalancing from investment to consumption in China is large
Source: WDI 2015

11. Impacts of China’s slowdown and rebalancing: Channels of transmission
Slower growth lowers external demand for exports
Weaker Chinese demand for commodities could contribute to the downward pressure on global commodity prices
China’s rebalancing
Rebalancing away from investment towards consumption could benefit goods & services exporters
Chinese private consumption becomes relatively more intensive in imports than investment was
Shift towards services sectors in China could replace domestic production with increasing imports of other goods
If supply responds positively to shifts in relative prices and the new sources of consumer demand from China, rebalancing is expected to have favorable impact on global economy and offset negative effects of slowdown

12. Exposure to China has led to traditional export contraction…
Selected exporters, 2015: Jan-Nov versus 2014: Jan-Nov

13. ..but reversal of fortune: opportunities for goods exporters..
Growth in merchandise exports to China, by share of intermediate goods and consumer goods

14. … and service exports as China’s services imports surge
Indices of China’s import values of goods and services and share of services in total imports,

15. More broadly, global services trade has been resilient…
It declined less during the crisis and has grown faster after the crisis - due to digitization and demographics

16. New WB STRI Database covers 103 countries
…and there is scope for further services liberalization – potentially boosting both services and goods trade
New WB STRI Database covers 103 countries
Source: Borchert, Gootiiz and Mattoo (2013)