Long-term patterns of trade and specialisation

This paper presents descriptive evidence of specialisation trends and investigates empirically their causes and consequences, analysing the role of policies in this process. Then, based on the insights from the backward looking analysis, it draws global trade and specialisation scenarios up to 2060, taking into account international spillovers. The paper highlights that comparative advantage in terms of factor endowments matters for trade specialisation, although framework and trade policies also play a role. For instance, tariffs on intermediate inputs are found to adversely affect trade with this adverse effect found to have increased over time, likely reflecting expanding global supply chains magnifying the impact of tariffs. The forward-looking analysis suggests that over the next 50 years, the geographical centre of trade will continue to shift from OECD to non-OECD regions, reflecting faster growth in these countries. Multilateral global trade liberalisation could raise world trade by 15% by 2060 relative to the status quo, whereas regional liberalisation among a core group of OECD countries only would raise world trade by 4% due to trade diversion.