Kurgan: Global manufacturing production vs. global trade in manufacturing
A couple of weeks ago I posted a chart showing the long-term trend of world trade in manufactures relative to world production. The paper I took the chart from, however, only went up to 2000. And I decided to update it for the next edition of Krugman Obstfeld Melitz. And it’s pretty striking:
You see the interwar trade decline; the growth in world trade after World War II didn’t return to 1913 levels of globalization until around 1970. But since then, trade has grown incredibly. Interestingly, the big tariff cuts in GATT rounds had already happened in the early 1950's; what we’re looking at here is trade liberalization in developing countries plus containerization, and the emergence of massive vertical specialization (iWhatevers being made in many stages in different countries).
No special moral here — and no, it doesn’t actually make the world flat, because services account for most value added and are still mainly not tradable. But it’s quite a picture.
http://krugman.blogs.nytimes.com/2013/07/03/unprecedented-globalization/
Interesting insight into the roles that the rise of Third World countries and the advent of containerization have played in the rise in the international trade in manufactured products rather than the role played by lower tariffs.
