Belfast Telegraph

View from Dublin: growth in global trade comes despite continued political tension

By Dan O'Brien

'Global trade recorded its highest growth rate in six years in 2017, both in volume and value terms'.

That was the happy opening line of the World Trade Organisation's (WTO) analysis of recent trends in cross-border commerce two weeks ago.

The organisation's latest figures show that last year global exports of goods rose by 11% to nearly $17.7trn. Stripping out price effects, volume growth was a somewhat more modest 4.7%. Cross-border sales of services grew by 7%, to $5.25trn.

The uptick in commerce among the nations of the world last year may be a sign that rising political uncertainties are having less impact on internationalised economic activity than might have been expected.

One measure economists have used to check how globalisation is faring is the comparison between trade growth and GDP growth. World trade has grown twice as fast as global GDP in recent decades. The exceptions were periods of recession and the half decade to 2016, a period which raised questions as to whether the pace of globalisation was slowing.

But last year's acceleration in the rate of world trade growth gives some reason to believe that the previous five-year period of unusually low trade growth may have been an aberration rather than the result of structural changes, policy shifts or a reaction to political changes.

The main driver of trade is usually economic growth. As long as there's a liberal international trading system, businesses can access growth opportunities in foreign markets, while increased prosperity at home encourages the purchase of goods and services from abroad.

The WTO noted how the composition of economic growth affects trade patterns. In general, investment spending - on plant, machinery, buildings and infrastructure - is the most import-intensive activity in most economies, as many of materials have to be sourced abroad.

Consumer spending follows, with non-investment spending by governments the least import-intensive component of domestic economic growth.

Belfast Telegraph

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