Has the crisis left a lasting mark on global trade

International trade expanded substantially during much of the past decade, boosted by underlying globalisation trends and supported by a benign global environment (ëthe Great Moderationí). But when the global financial and economic crisis hit in 2008, global trade collapsed, with merchandise trade contracting significantly more than global output. Supported by swift policy reactions and helped by the fact that protectionism was contained, the ensuing recovery of world trade was fairly rapid, but trade levels are still below their pre-crisis path, raising the question of a possibly longer-lasting impact of the Great Recession of 2008-09 on trade dynamics. The analysis presented in this chapter shows that there is no clear evidence of a structural break in the relationship between trade and GDP although the recession may have left its mark on the geographical and sectoral composition of trade. In a number of advanced economies, substantial adjustment due to fiscal consolidation and deleveraging in the private sector is constraining import growth in the short and medium term. By contrast, emerging market economies have been left relatively unscathed by the Great Recession. They account for a steadily growing share of global demand and are expected to cushion, at least partially, the demand shortfall in advanced countries, while the supply of trade finance does not appear to be a limiting factor at the current juncture. There are some indications that international supply chains in some sectors have embarked on a consolidation process, with fewer production stages involved and consequently less cross-border trade, but there is no broadly-based evidence for such a development. Overall, global trade seems to be approaching its long-term growth trend and will likely expand at lower rates than in the boom years of the previous decade.