Global Finance: Trade Winds Shifting

After years of stagnation, international trade growth is anticipated at 4 percent this year. “Many factors could explain what appears to be a secular decline in global trade: lower levels of business confidence and investment; demand cycles and their impact on commodity prices; the maturing of global value chains, which have in turn triggered structural changes in the composition of cross-border trade; and deficiencies in how global trade data is captured and measured,” explains Jonathan Gregson for Global Finance. Multinationals that rely on in-house suppliers may do better at weathering economic disruptions than companies that depend on unaffiliated suppliers. Shifting priorities in China toward consumption contribute to the slowing pace of growth in trade; political uncertainties are slowing investment, which contributes to economic growth more so than consumption. Thomas W. Hertel, executive director of the Center for Global Trade Analysis at Purdue University, points to China and other nations easing back on supply chains and pursuing more value-added activities. While finance remains a challenge for developing nations, countries increasingly buy more goods and services close to home, and the article suggests “the momentum toward more south-south trade… is unstoppable.” – YaleGlobal