Žloƒal trade and insurance ­ar„et growt‚ Figure 1 25 lobal exports in ‹„­ trillion 20 15 10 5 0 19801982 1984 19861988 1990 1992 19941996 1998 20002002 2004 2006 20082010 2012 2014 Services exports Agriculture Fuels and mining Manufactures „ource“ ŒT¢‰ „wiss ˜e Economic ˜esearch ™ —onsulting… Structural factors The slowdown in global trade is based The recent slowdown in trade relative to ­€ growth results rom sluggishness in on sluggishness in trade o goods… Trade trade o goods‰ in particular in manuacturing‰ uel and mining products… ¦y contrast in services continues to exceed income trade in services is still growing at a much higher rate than global ­€… ‘owever‰ as growth… ¥igure 16 shows‰ services still account only or about one ith o global trade… The slowdown in global trade‰ thereore‰ is about structural changes in the production and trade o goods rather than services… The expansion o international supply The rapid expansion o international production networs/supply chains is an chains was an important driver o global important actor in explaining the outperormance o trade relative to income growth 12 trade in the two decades prior to the in the two decades prior to 200ƒ… Trade is measured on a gross value basis…  a midŽ2000s… good which consists to a large part o imported intermediate goods is exported‰ the imported intermediate goods are recorded again in a country’s exports… n contrast‰ ­€ only measures the value added in the exporter country… ‘ence‰ in the years beore 200ƒ‰ the rise o global value chains led to a large increase in the tradeŽtoŽ ­€ ratio… ¢shoring is a tradeŽo between ccording to theory‰ the undamental tradeŽo in supply chain dispersion is between 13 specialisation gains and coordination specialisation gains and coordination costs… The revolution in inormation and costs… communication technology radically lowered coordination costs in the 1¡¡0s and early 2000s… ‘owever‰ the recent slowdown in oshore activities indicates that a urther substantial reduction in communication costs might be hard to achieve… n addition‰ narrowing wage gaps between countries lie —hina and advanced 1’ economies could lower specialisation gains… —onstantinescu et al… ind evidence that the slowing pace o international vertical speciali§ation might be another structural change aecting the tradeŽtoŽincome relationship… The E—¦ supports this inding by presenting evidence rom the Œorld nputŽ¢utput ­atabase… The share o oreign value added in gross exports increased until 200‰ and has remained broadly unchanged since 200¡… ‘igh wages in some emerging marets appear to be reducing dependence on oreign supply chains as manuacturers shit production bac to their home country… 12 … aulier‰ … „antoni‰ ­… Taglioni et al…‰ “The power o a ew in determining trade acceleration and slowdowns” in ¦… ‘oeman †ed‡… Te loal Trade lowdown ­ €ew €ormal?, ¨oxE‹ ¦oo‰ 201… 13 ˜… ¦aldwin‰ “lobal supply chains“ Œhy they emerged‰ why they matter‰ and where they are going”‰ C‚PR ƒiscussion Paers, vol ¡103‰ 2012… 14 —… —onstantinescu‰ … ‚attoo and ‚… ˜uta‰ op… cit… 1 Swiss Re sigma No 3/2016