Susan Lund, James Manyika, and Michael Spence
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All these trends play to the strengths o developed countries,
where skilled work forces, large quantities o capital, huge customer
bases, and dense clusters oÊ high-tech companies combine to power
modern economies. Middle-income countries, such as China and
Mexico, may also beneÃt from the next era o globalization (although
changing trade and investment patterns may well leave sections o
their work forces behind, just as they did in rich countries over the
past two decades). The poorest countries, meanwhile, will see their
chie advantage—cheap labor—grow less important.
Rich countries have chosen a spectacularly poor time to begin clos-
ing themselves o from trade, investment, and immigration. Rather
than pulling up the drawbridge just as the beneÃts o globalization
have begun to Áow back toward the developed world, they should
Ãgure out how to take advantage o these changing patterns o global-
ization. Making sure that everyone, not just the already successful,
beneÃts will be a daunting task. But the one way for rich countries to
ensure that everyone loses is to turn away from the open world just as
they are becoming the masters o it.THAT WAS THEN...
In the 1990s and the early years o this century, growth in trade
soared, especially in manufactured goods and natural resources. In
2001, China’s entry into the World Trade Organization helped cre-
ate a vast new manufacturing center for labor-intensive goods. The
digital revolution allowed multinational companies to stretch their
supply chains around the world. This spurt o globalization was fu-
eled in part by trade in intermediate goods, such as raw materials
and computer chips, which tripled in nominal value, from $2.5 tril-
lion in 1995 to $7.5 trillion in 2007. Over that period, the total value
o goods traded each year grew more than twice as fast as global ³²¡.
Then came the Great Recession. Global trade Áows plummeted.
Most analysts assumed that once the recovery gained steam, trade
would come roaring back. They were wrong. From 2007 to 2017,
exports declined from 28 percent to 23 percent o global gross out-
put. The decline has been most pronounced in heavily traded
goods with complex global value chains, such as computers, elec-
tronics, vehicles, and chemicals. A decade after the Great Reces-
sion, it is clear that trade is not returning to its former growth
rates and patterns.