Not Much Liberalization and Lots of Micro-Protection
For six decades after the Second World War (1945 to 2005), unprecedented growth of trade in goods and services and spectacular expansion of foreign direct investment (FDI) were powerful drivers of the best half-century in human history. Global trade maintained an annual growth rate of 6 percent in real terms, while the global stock of FDI grew at 15 percent annually in nominal terms between 1980 and 2005. Figures 1 through 4 portray the growth of trade and investment expressed both in current dollars and as percentages of world GDP. The intertwined expansion of trade and investment propelled annual growth of 4 percent in world GDP, lifting billions of people out of abject poverty in developing countries and delivering a comfortable life style to hundreds of millions of people in advanced countries.
But following the Great Recession of 2008–09, global trade and FDI performance did not resume their accustomed growth rates, unlike in the aftermath of previous recessions (figure 1). Four years of flat or declining world trade to GDP ratios were experienced between 1974 and 1978, six years between 1980 and 1986, two years between 2000 and 2004, and now seven years and counting since 2008. This is the longest postwar period of relative trade stagnation.