Julia Wörz

Understanding the Weakness in Global Trade - What is the New Normal?

Global trade has been exceptionally weak over the past four years. While global trade grew at approximately twice the rate of GDP prior to the Great Recession, the ratio of global trade to GDP growth has declined to about unity since 2012. This paper assesses to what extent the change in the relationship between global trade and global economic activity is a temporary phenomenon or constitutes a lasting change. It finds that global trade growth has been primarily dampened by two factors. First, compositional factors, including geographical shifts in economic activity and changes in the composition of aggregate demand, have weighed on the sensitivity of trade to economic activity. Second, structural developments, such as waning growth in global value chains, a rise in non-tariff protectionist measures and a declining marginal impact of financial deepening, are dampening the support from factors that boosted global trade in the past. Notwithstanding the particularly pronounced weakness in 2015 that is assessed to be mostly a temporary phenomenon owing to a number of country-specific adverse shocks, the upside potential for trade over the medium term appears to be limited. The JEL Classification: F10, F13, F14, F15

'Made in China' - How Does It Affect Our Understanding of Global Market Shares?

Abstract We propose a comprehensive decomposition of changes in global market shares that accounts for the value-added content. We find that the ongoing globalization process affects market shares directly by shifting production from developed to developing countries. Moreover, apparent improvements in the relative quality of exported goods from most new EU member states and developing countries occur to some extent from higher quality imported inputs. Hence, the process of outsourcing high-quality production from developed countries plays an important role and reduces the contribution of residual non-price factors in explaining market share gains of developing countries.