Managing Openness : Trade and Outward-oriented Growth After the Crisis
The global financial crisis is stimulating a broad reassessment of economic integration policies in developed and developing countries alike. The crisis was associated with a great trade collapse, the sharpest in recorded history and the deepest si...
| Main Authors: | , |
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| Format: | Publication |
| Language: | English |
| Published: |
World Bank
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000333037_20110411010358 http://hdl.handle.net/10986/2283 |
| Summary: | The global financial crisis is
stimulating a broad reassessment of economic integration
policies in developed and developing countries alike. The
crisis was associated with a great trade collapse, the
sharpest in recorded history and the deepest since Second
World War (Baldwin 2009). The trade collapse affected all
countries and products, although to different extents. While
signs of recovery are starting to solidify, deeper
questioning of the causes of the crisis and the merits of
globalization has surfaced. The emergence of China and the
imbalances of its trade with the United States are shaking
the stability of the global system. Are these imbalances
sustainable, or do they need to be adjusted to avoid another
global crisis? What impact will these adjustments have on
the trade of developing countries if they mean that China
consumes more and the United States saves more? Openness has
helped support growth in many countries, to unprecedented
levels in Brazil, China, Indonesia, Malaysia, and others.
Yet today many are concerned that openness is creating
vulnerability, and vulnerability can hurt growth. No one
believes that inward orientation is the solution or that
domestic consumption alone can boost growth, even in large
countries. The longer-term benefits of openness more than
compensate for the short-term negative impacts of trade
shocks. The question is not whether to remain open but
rather what kind of safety and insurance systems, at the
micro and macro levels, to put in place to better hedge
against shocks from globalization. As developing countries
try to find answers to these questions, they also face a
drastically changed trade environment. The crisis proved
that protectionism is no longer the name of the game; it
remained largely under control thanks to a solid
multilateral regime as well as to a new system of production
sharing across countries, which does not lend itself
naturally to broad-based protectionism. Moreover, the role
of South-South trade is growing, giving developing countries
new opportunities to export and new opportunities to import
cheaper capital goods, now produced in countries like China
or India, that allow them to industrialize faster. Thus,
while outward-oriented growth is here to stay, it needs to
be put in a different perspective and packaged with
additional policies. As the world emerges from the crisis,
the author expect to see the development of an
'export-led growth version 2.0' model that
reflects these new dynamics. |
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