What Prompted the Global Trade Slowdown?

The global economy has slowly recovered from the financial crisis of 2008–2009. Since the crisis, however, economic prospects have been adversely affected by disappointing performance in global trade. The world economy experienced an extended period of rapid trade growth referred to as “globalization,” beginning in the 1980s and continuing up until the 2008 crisis. Trade consistently grew almost twice as fast as output over this 25-year period due to major shifts in technology and government policies. Post-crisis, however, with the exception of a 13 percent “rebound” in 2010, trade growth slowed from an average of 7 percent per year to an average 3.4 percent between 2012 and 2014. This report reviews some of the factors that accelerated trade during the years before the crisis, considers various explanations for the post-crisis slowdown, and examines the role of government policies in reducing the headwinds now affecting global economic growth.