Trade as an Engine of Growth : Sputtering but Fixable

International trade has been an important engine of output and productivity growthhistorically. But since the global financial crisis, world trade growth has slowed, reflecting cyclical and structuralforces. The COVID-19 pandemic and Russia’s invasion of Ukraine have further disrupted commodity markets, globalsupply chains and the trade that accompanies them. A removal of impediments that raise trade costs could reinvigorateworld trade. Trade costs, on average, roughly double the cost of internationally traded goods relative todomestically sold goods. Tariffs amount to only one-twentieth of average trade costs; the bulk are incurredin shipping and logistics, and trade procedures and processes at and behind the border. Despite a decline since1995, trade costs remain about one-half higher in EMDEs than in advanced economies; about two-fifths of this gap appearsto be due to higher shipping and logistics costs and a further two-fifths due to trade policy. A comprehensivereform package to lower trade costs could yield large dividends. It is estimated that among the worst-performingEMDEs, a hypothetical reform package to improve logisticsand maritime connectivity to the standards of the best-performing EMDEs would halve trade costs.