{"id":7395,"date":"2025-03-11T16:48:33","date_gmt":"2025-03-11T15:48:33","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=7395"},"modified":"2025-03-11T17:06:48","modified_gmt":"2025-03-11T16:06:48","slug":"recent-history-of-global-trade-relations","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2025\/03\/11\/recent-history-of-global-trade-relations\/","title":{"rendered":"Recent History of Global Trade Relations"},"content":{"rendered":"

For many years, the increasing economic integration among countries was taken for granted. Then came trade wars, open conflicts, and a pandemic. Yet, in the end, trade has not decreased. Instead, its geography has changed: countries and regions that were marginal forty years ago are now central players. The structure of the global market is evolving, but without breaking international economic and productive ties.<\/em><\/p>\n

 <\/p>\n

Not even the uncertainties and turbulence of the global geopolitical landscape have managed to slow down economic integration among countries. This process has been growing since the post-war period and has remained strong even in recent years, proving its ability to overcome technological\u2014and, more importantly, political\u2014obstacles.<\/p>\n

Why Discuss Economic Integration?<\/strong><\/h3>\n

When can we talk about increasing economic integration? We refer to it when the economic systems of countries and regions become increasingly interconnected and interdependent. This happens whenever barriers to trade between countries are further reduced. Naturally, economic integration is never perfect, as some barriers remain even in the most integrated environments\u2014for example, within the European Union, where different languages and habits persist. On the other hand, all countries are at least partially integrated, as none can operate in complete autarky.<\/p>\n

Integration is measured, observed, and debated because it has numerous implications for how economies function, for better or worse. It boosts productivity by allowing countries to specialize and firms to benefit from large international markets. It aligns economic cycles among nations, harmonizes prices and wages, and facilitates the transfer and sharing of technological knowledge. However, due to high levels of economic integration, energy prices worldwide are affected by geopolitical tensions in any region. Similarly, economic policies implemented in the United States have effects on both sides of the Atlantic, and a real estate crisis in China influences exports in many regions.<\/p>\n

How Do We Measure It?<\/strong><\/h3>\n

The simplest and most common way to measure economic integration is by looking at the volume of trade between countries\u2014that is, international trade values, expressed in absolute terms or as a percentage of gross domestic product (GDP).<\/p>\n

If trade barriers between countries are high and integration is low, conducting trade beyond national borders is costly, leading to limited international trade. Conversely, with a high level of integration, cross-border transactions become easier and less expensive. Trade can involve final goods as well as intermediate goods exchanged throughout production processes that span multiple countries\u2014what are known as global production chains.<\/p>\n

The figure below shows the annual trend of global exports in millions of U.S. dollars at current prices since 1980. The vertical bars indicate how trade volumes have grown over time, with a significant acceleration in the early 2000s, partly due to the spread of international production chains. However, global trade has been negatively impacted by international crises: exports dropped significantly in 2009 following the global financial crisis of 2008 and again in 2020 during the COVID-19 pandemic. Nonetheless, after each crisis, trade has rebounded, reaching record levels in recent years. In 2023, there was a slight decline due to geopolitical tensions, but preliminary 2024 data (not shown in the graph) indicate a new recovery.<\/p>\n

Based on this data, we can conclude that, over the past half-century, economic integration among countries has shown a persistent upward trend.<\/p>\n

 <\/p>\n

International Trade Trends in Value and as a Percentage of GDP<\/strong><\/p>\n

\"\"
Source: Calculations based on World Bank data.<\/figcaption><\/figure>\n

 <\/p>\n

The same figure also shows global exports as a percentage of global GDP, measuring the share of domestic production of goods and services that is traded internationally. This indicator has generally increased, particularly from the late 1980s to 2008, though its growth has plateaued over the past fifteen years, with noticeable dips and recoveries. The value now stands at approximately 30%, meaning that, on average, exports account for about one-third of global final production. This reflects a high degree of interdependence among countries, significantly greater than what was observed at the end of the last century.<\/p>\n

However, the overall global trend results from different regional patterns. In other words, the degree of economic integration is not uniform across regions. The European Union has the highest level of economic integration, measured as the export-to-GDP ratio, exceeding 50%\u2014more than doubling over the past forty years. China has also doubled its export-to-GDP ratio during the same period, but its trajectory differs from that of the EU: starting at 10% in 1980, it surged rapidly to 36% by 2006 before declining to around 20% in recent years. In the United States, the export-to-GDP ratio has grown much less, fluctuating around 10%, with a peak of about 14% in 2014.<\/p>\n

A similar pattern emerges when examining the import-to-GDP ratio for individual countries.<\/p>\n

Differences among countries align with economic theory. Smaller nations tend to be more open and economically integrated with others, as it is more challenging for them to produce everything domestically. Meanwhile, their firms look abroad for larger markets. This contrasts with larger economies like the U.S. As for China, after an export-driven growth phase\u2014necessary when its domestic market was underdeveloped\u2014it has now settled into an export-to-GDP ratio more suited to its economic size.<\/p>\n

However, economic and trade policies remain crucial. For decades, the EU has implemented active economic integration policies among its member states, removing various barriers and transaction costs. Unsurprisingly, this has resulted in a highly integrated economic area.<\/p>\n

Beyond trade in goods and services, other factors also reflect economic integration among countries. In highly integrated regions, factors of production\u2014including physical capital (machinery, plants, etc.), financial capital, labor, technology, and businesses\u2014can move freely across borders. Thus, economic integration can also be measured through foreign direct investment (FDI), which occurs when a company establishes production facilities in another country, or through migration flows. However, in these areas, barriers remain higher, making economic integration lower than what is observed in international trade.<\/p>\n

The Structure of Global Trade in Globalization<\/strong><\/h3>\n

The result of economic integration is what we commonly call “globalization,” that is, the transition from a system composed of separate countries to a connected system. The term encompasses many different aspects, but in economics, it often specifically refers to the high level of trade and economic integration\u2014the removal of barriers and borders\u2014between different countries.<\/p>\n

However, when discussing globalization, we also refer to the fact that countries increasingly tend to trade with all other countries, establishing multiple commercial ties.<\/p>\n

A nation, in fact, can be strongly integrated only with certain others, concentrating its trade with a few selected partners. Alternatively, it can be integrated with the entire global market. Another possibility is a high level of global integration in terms of total trade, but within a world divided into blocs, where countries within each bloc conduct many transactions among themselves but engage in relatively few exchanges with countries outside their bloc.<\/p>\n

The different forms that economic integration takes are significant because only a system that is fully open and integrated ensures the efficient allocation of resources. On the other hand, the creation of separate country blocs can lead to increased frictions and inefficiencies\u2014an issue that Nobel Prize-winning economist Paul Krugman pointed out some time ago.<\/p>\n

To better understand the structure of economic integration, it is useful to examine the network of trade between countries. In this analysis, the focus is not so much on the total volume of international trade but rather on which countries trade with which others. Once again, the increasing economic integration among states becomes evident: the number of connections between countries has grown significantly over time, meaning that, on average, all countries have increased the number of their trade partners.<\/p>\n

The figure below illustrates the structure of trade between countries over a span of three decades, highlighting only the connections with key partners. In addition to the densification of trade ties, there is also a profound transformation in the roles that countries play within the global trade system.<\/p>\n

 <\/p>\n

The Structure of Global Economic Integration: The World Trade Network<\/strong><\/p>\n

 <\/p>\n

Trade connections between countries (exports and imports) in 1990<\/strong><\/p>\n

\"\"
Source: VisualCapitalist elaboration based on IMF data.<\/figcaption><\/figure>\n

 <\/p>\n

Trade connections between countries (exports and imports) in 2020<\/strong><\/p>\n

\"\"
Source: VisualCapitalist elaboration based on IMF data.<\/figcaption><\/figure>\n

 <\/p>\n

In 1990, the significance of the European and American blocs is immediately clear\u2014they traded extensively with each other, though these were not their primary ties\u2014and much of Asia occupied a relatively peripheral position. By 2020, the situation had changed dramatically: China\u2019s centrality in the global trade system stands out, making it, along with the United States, the country with the highest number of trade connections.<\/p>\n

It is also evident that the U.S.-China connection is particularly strong, highlighting the potential issues that could arise if a real rupture were to occur between the two nations. Since the trade war initiated by the first Trump administration in 2018, the share of U.S. imports from China has declined. However, neither total U.S. imports nor Chinese exports have decreased; instead, trade flows have been partially redirected through other countries. Several studies show that economic interdependence between the two giants, facilitated by global supply chains and various forms of exchange, remains extremely high.<\/p>\n

Future Prospects<\/strong><\/h3>\n

In conclusion, overall economic integration among countries does not appear to be declining, although its characteristics and structure have changed significantly in the new century. The assumption of ever-increasing integration has given way to a more complex and uneven trajectory. Additionally, many countries have reshuffled their trade partnerships, partly due to the significant entry of various emerging economies, including medium-sized ones, into the trade system. This has greatly increased the system\u2019s complexity, but so far, it has not significantly reduced its cohesion.<\/p>\n

In determining the course of economic integration, traditional economic policies have recently been supplemented by geostrategic considerations. In this regard, a report from the World Trade Organization highlights an increasing fragmentation of trade flows since the start of the war in Ukraine in 2022, with exports and imports being realigned along geopolitical lines.<\/p>\n

We can expect further shifts in the global market structure in the coming years, especially if a second Trump administration, despite clear indications of the costs and issues associated with such measures, continues its policy of imposing high tariffs, particularly targeting certain countries, thereby triggering similar retaliatory measures. This will lead to yet another realignment of trade flows and, contrary to Trump\u2019s intentions, could further diminish the U.S.’s centrality in the global trade system.<\/p>\n

Nonetheless, the substantial benefits that most countries have gained from increasing economic integration make it difficult to foresee a significant overall reduction in economic and production ties between nations.<\/p>\n

 <\/p>\n

Lucia Tajoli is a full professor of Economic Policy at the Polytechnic University of Milan and a Senior Associate Research Fellow at ISPI. Her research focuses on international trade, economic integration, and its effects.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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