Era of Services Sector Globalisation?

Trade policy is once again gaining prominence in the agenda of multilateral agencies like the International Monetary Fund. Though open trade remains the top priority, there is now a slow policy shift in favour of diversification of trade to build resilience in times of crisis like the pandemic. They also vouch that a significant reduction in barriers to services trade can foster higher growth and confer substantial gains to the global economy. One reason for this refocus on global trade is its diminishing role in global growth as evident from the stagnant ratio of global merchandise trade to gross domestic product (GDP) since the middle of the 2000s.

This is a far cry from the scenario just three decades back when international trade buoyed up global growth and opened new markets to emerging and developing countries. Between 1990 and 2008, global merchandise trade grew at an annual average rate of 9.1%. However, growth of global merchandise trade has halved to 4.1% since then. Though global merchandise trade has now touched $45 trillion in 2021, its share in the global GDP shrunk from 51% in 2011 to 46.5% in 2021.