Will trade lead or lag the recovery?
As signs grow that the worst of the global slowdown is passing, fears are being voiced that world trade could hold back the recovery. The answer depends on whether trade is seen as a reflection of the broader economy or a transmission belt for the downturn. The links between finance and trade are still little understood. World trade has experienced its biggest contraction since the 1930s — much sharper than the fall in economic output.
Some economists argue that damage to trade finance and global supply chains, and a series of open and furtive protectionist measures in the meantime, could hamper the recovery in trade, and with it the rebound in output. “There is good reason to fear that trade growth will lag rather than lead any recovery, and that this will itself constrain the pace of recovery,” consultants PFC Energy said. Globalisation — the integration of the world economy — could go into reverse as national self-interest takes priority over the promotion of trade, they said in a recent note.
URL Source: http://www.stuff.co.nz/business/world/2747949/Will-trade-lead-or-lag-the-recovery
