International Trade: The News is Better Than the Headlines
Buried in the recent avalanche of trade tweets were two interesting data points that did not make the front page. The first is a speech by World Trade Organization (WTO) director general Roberto Azevedo that rolled out the WTO’s annual trade forecast. He noted that global trade grew 4.7 percent last year, which was the largest increase in six years, and that it is predicted to grow at the rate of 4.4 percent this year and four percent next year.
This data was accompanied by the now-standard caveat that an increase in protectionist actions and particularly a “cycle of retaliation” (no names mentioned, but we all know who he was talking about) could negatively affect these numbers. The report also noted that these numbers are below the average annual growth rate since 1990, which is 4.8 percent.
So, the news is not spectacular, but it also is not panic inducing. There has been an increase in the number of articles recently about the end of globalization, declining world trade, and what that means for everybody (something bad, for sure). The actual data suggests, however, that panic may be premature. World trade is not declining—yet—it is growing, and growing at a still-respectable rate. The question the United States faces is to what extent we will continue to be a part of it.
When I teach globalization, we have a discussion about whether it is reversible. The outcome is usually agreement that the answer is “yes,” but it takes a fairly cataclysmic series of events for that to happen. There are three historical examples, two of them very old: the collapse of the Roman Empire in the fifth century and the recurring arrival of plague in Europe in the thirteenth and fourteenth centuries. The more recent example is the period after 1913, when global trade began a steep decline that was not entirely erased until around 1970. Two world wars and the Great Depression had a lot to do with that.
We can never rule out a new cataclysm. Neil Howe and William Strauss, in their 1997 book, The Fourth Turning: An American Prophecy, see history as a series of roughly 20-year cycles that begin with strong institutions and high social confidence and culminate in a “third turning,” which is a time of weak and distrusted institutions, strong individualism, rampant cynicism, and weak civic authority. (Sound familiar?) The fourth turning that follows, appropriately called “Crisis,” is when we rebuild from the ground up. That may well be our fate, but as far as the global economy is concerned right now, we are clearly not there yet. The sand may be leaking out of the bag, but so far it’s just a dribble, which means there is still time for repairs.