The Increasing Importance of Services Expenditures and the Dampening Effect on Global Trade

 

While global trade as a fraction of GDP may have peaked, trade in goods and services will continue to provide a substantial source of economic growth and welfare gains for both developed and developing countries in the years ahead. The research by Lewis et al. highlights the importance of structural change in influencing global openness, a factor that has been little studied in the literature thus far. The authors provide the important finding that the reduction in openness that has occurred since the global recession of 2008 can be attributed in part to ongoing structural change and the difficulty in reducing trade costs of goods further. Given their findings, the leveling off of global openness seen in the data does not necessarily point to increased trade protectionism.

 

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To read the full report from the U.S. Federal Reserve Bank of Chicago, please click here.