In recent months, the world economic and political context has been characterized by events destined to have a significant impact on the dynamics of the coming decades: geo-political problems and the significant slowdown (and now protracted over time) of some macroeconomic indicators have led many observers to believe that the phase of globalization underway since the Second World War has ended, and that far from being a different phenomenon from the previous ones, it was in reality only the latest in a series of cycles that repeat themselves at more or less less long and regular for decades.
On the other hand, globalization requires both an architect and an arbiter, and today no country is able (or willing) to perform one or the other function: neither the United States, which has long been a protagonist in both roles, nor emerging countries such as China or India, still committed to building a full identity internally. As is always the case with any phenomenon that is fading away, we wonder today about the actual benefits that globalization has brought in economic and social terms. In a recent report, Unctad has advanced the idea that for developing countries, participation in the global value chain has not brought the expected benefits, and that indeed on numerous occasions for many of these countries the costs associated with free exchange outweighed the benefits.
One of the most cited examples is precisely that of China, a country that is today a leader in world trade in high tech products (Chinese imports and exports account for about a third of the world value of trade in these goods) but in which only the 3% of global profits made by companies in this sector. In recent years the gradual fragmentation of international relations has become evident in the proliferation of trade agreements that followed the failure of the Doha Round. Abandoning the spirit of previous agreements, which was to seek greater integration between countries at different stages of economic development, today trade agreements increasingly favor geographical proximity or (even more frequently) involve groups of homogeneous countries: the Trans Pacific Partnership and the Transatlantic Trade and Investment Pact1 are examples of this.
The problems in the European Monetary Union, and before that in the European Union (realities born from the desire to expand the reference markets and make free trade an instrument of growth and peace), together with the attempt (made precisely in recent months) by part of the so-called BRICS to create an institution capable of granting them greater political weight than that granted by the International Monetary Fund,2 are all indications that have led numerous observers to believe that the world order designed starting from Bretton Woods is in largely to be reviewed, and that the very concept of free trade, which represented a fundamental pillar of it, is destined in the near future to have perhaps a less important role than in recent decades in stimulating world growth.
Slow down world trade
The signs of a substantial turnaround in the growth of world trade already became evident in the two-year period 2012-2013 in which the exchange of goods and services traveled at growth rates close to (or lower than) world GDP. This fact represents a strong anomaly in the global macroeconomic scenario, in which in the last thirty years the ratio between trade and GDP has almost always been 2:1. In fact, since the data have been available, the only period in which growth of world trade was lower than the growth of GDP for protracted periods between 1913 and 1950. Starting from 1980 and up to 2011 however, despite the collapse recorded in 2009, world trade grew by about 7% year, against values around 3-4% of GDP.
Although slightly recovering, the data for 2014 seem to confirm the downward trend. According to Unctad, in the second quarter of the year, world exports recorded limited growth, equal to 1,1% on an annual basis, after +2,1% in the previous quarter. The data is the result of divergent trends between the different areas of the planet even if compared to the past the gap between countries and areas at different stages of development is shrinking. In developing countries, growth was 2,4% y/y, while the figure for advanced countries is just over zero (0,2%), after four quarters of positive change. For economies in transition, the second quarter of 2014 marked a negative change (-0,5%).
The disappointing performance of developed countries was also determined by the negative data recorded by the EU-28 (-1,1% y/y) conditioned in turn by a substantial stagnation in foreign sales of the main European engine (Germany) and by the poor French result (-2,8%). In the March-June quarter, the data relating to Spain was also negative (-0,5%), a country which from the beginning of 2013 to the first quarter of 2014 had recorded an average variation of 7,6%, higher than that observed by China in the same period (slightly less than 7%). For Italy, the second quarter saw growth of 2% y/y, after +1% in the first quarter and substantial stagnation in the previous two quarters. The picture for developing and transition countries is more complex.
In fact, the analysis of the latest data shows a positive trend in foreign sales of the countries exporting manufactured products: the three-month moving average shows sustained growth rates for Poland, Romania, the Czech Republic, India, Malaysia, China, the Philippines, Hungary and Mexico, countries benefiting from an increase in demand, mainly from the United States. On the other hand, some raw material exporting countries (above all base metals), in particular in Latin America and Africa, have suffered a sharp slowdown in exports, with very marked negative changes in the case of Peru, South Africa, Colombia and Indonesia. For the end of this year, WTO estimates forecast world trade growth of around 4,5% y/y, and an increase of just over 5% next year, estimates supported by growth in world demand for containers which travels around +4-6% for the next two years.
Although the expected figure for 2014 is higher than that recorded in 2013 (in fact it is more than double), it is still lower than the average of the last 20 years (equal to 5,3%). The slowdown in trade has not blocked the recomposition of the weight of market shares on world exports between advanced and emerging countries which has been going on for some years. In 2013 (latest available data from UNCTAD source) the share of exports from developing countries reached the highest value (48,8%) since 1948 (that is, since the series was available), when it did not reach 32 %. The progress of these countries was in fact very slow, and with several periods of slowdown in which the gap with the advanced widened (as happened in 1972, when the two shares were equal to 76,9 and 18,9 %).
The change of pace took place only at the beginning of the 2005s, with a surge in 2,4 - when in just one year the share of developing countries increased by 2010 percentage points - and in 2,2, with a gain of additional 4 points. The greatest impetus obviously came from China, which entered the 7,9s with a share of just under 2005%, reaching 10% in 2010, and then exceeding 11,7% in 7,7. Today the country exports 3,1 .2,8% of goods worldwide, a share that is only close by that of the United States and, at a distance, by that of Germany, which, despite a downward trend, still retains a market share of 1,7%. Among the countries of the euro area, Germany is followed by France (XNUMX%) and Italy, which with a share of XNUMX% remains well above Spain (XNUMX%).
The structural causes of the slowdown
There are many factors that have contributed to determining the recent slowdown in trade, some of which are limited to the economic context, others destined to have long-term repercussions. Among the former, the WTO attributes a high weight to the slowdown in demand from euro area countries, and to the uncertainty over the management of US monetary policy which until the beginning of this year had negative consequences on exchange rates some emerging countries. However, other processes have a greater and more lasting impact, first and foremost a strengthening of protectionism at a global level. The idea is now generally shared that the consequences of the Great Depression of 1929 were amplified by a strong wave of protectionism initiated by the United States with the introduction, in 1930, of the so-called Smooth-Hawley Tariff Act, which led to extremely high levels tariffs on imports into the USA of thousands of products.
Despite some authoritative declarations against protectionism, and the diffusion of a large literature on the subject demonstrating the ineffectiveness of these measures in halting the crisis, starting from autumn 2008 (two months after the bankruptcy of Lehman Brothers) the protectionist measures they multiplied; a study conducted in Switzerland3 and referring only to the G20 countries, counts over 1.500 protectionist measures (formal and informal) introduced between November 2008 and spring 2014. The European Commission4 in a report at the end of 2013, referring to a more stringent definition there were 688 protectionist measures between October 2008 and September 2013, a rate of ten new measures per month. According to a study by the WTO5, the increase in costs also linked to the presence of numerous and high import duties could lead to a regression in the ability of some emerging countries to produce products with a high technological content, relegating them to productions with a high intensity of work and little specialization such as some textile sectors.
The WTO itself also underlines how the barriers to international trade introduced to solve short-term problems are then very difficult to reduce or eliminate. Many restrictions on trade are justified by individual countries both on the basis of (allegedly) effective support for nascent national industries, and above all as measures to protect domestic employment levels. However, the OECD underlined6 that none of the studies conducted since 2000 has found a significant correlation between the trend in unemployment and the weight of imports on GDP: in all OECD countries the two variables seem, if anything, to have a diverging trend. A study conducted in the United States by the National Bureau of Labor Statistics has also shown that only 2,5% of job losses between 1996 and 2008 can be attributed to phenomena linked to increased import penetration, outsourcing and so on , against more than 50% due to changes in demand for some products or technological improvements.
Beyond these active anti-trade measures, an important role is also played in slowing down the world flow of goods by the increase in labor costs in some emerging countries (especially China), a phenomenon which has reduced the advantage of fragmenting the production chain through delocalisation processes. New technologies such as 3D printers, or the automation of many manual processes, are destined to give greater impetus to the phenomena of re-localization. On the demand side, the slowdown in some emerging economies weighs heavily, and above all the unexpected slowness with which domestic consumption is gaining weight in China.
