![]() ![]() This unbundling meant that the same value-added crossed borders several times. A key driver, however, was the establishment of international supply chains (manufacturing was geographically unbundled with various slices of the value-added process being placed in nearby nations). The rise in the 1990s is explained by a number of factors including trade liberalisation. The figure shows the trade-to-GDP ratio rising steeply in the late 1990s, before stagnating in the new century right up to the great trade collapse in 2008. From a historical perspective (Figure 8), the drop is astonishing. The question is: Why was it so big? The chapter by Caroline Freund shows that during the four large, postwar recessions (1975, 1982, 1991, and 2001) world trade dropped 4.8 times more than GDP (also see Freund 2009). Given the global recession, a drop in global trade is unsurprising. Why did trade fall so much more than GDP? The OECD has monthly data on its members’ real trade for the past 533 months the 7 biggest month-on-month drops among the 533 all occurred since November 2008 (see the chapter by Sónia Araújo and Joaquim Oliveira).įigure 1 The great trade collapses in historical perspective, 1965 – 2009 Today collapse is much worse for two quarters in a row, world trade flows have been 15% below their previous year levels.The 1970s event was twice that size, with growth stumbling to -11%.The 19 drops were comparatively mild, with growth from the previous year’s quarter reaching -5% at the most.As Figure 1 shows, global trade fell for at least three quarters during three of the worldwide recessions that have occurred since 1965 – the oil-shock recession of 1974-75, the inflation-defeating recession of 1982-83, and the Tech-Wreck recession of 2001-02. Global trade has dropped before – three times since WWII – but this is by far the largest. A few facts justify the label: The Great Trade Collapse. The drop was sudden, severe, and synchronised. ![]() Signs are that it has ended and recovery has begun, but it was huge – the steepest fall of world trade in recorded history and the deepest fall since the Great Depression. ![]() The “great trade collapse” occurred between the third quarter of 2008 and the second quarter of 2009. ![]()
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