Global Trade Fragmentation. An EU Perspective

Norbert Gaal, Lars Nilsson, Jose Ramon Perea, Alessandra Tucci and Beatriz Velazquez

No 75, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The risk of global trade fragmentation has increased significantly. Rising geopolitical tensions, a growing number of trade restrictions and a weakening of multilateral institutions have been important geopolitical drivers. These trends have been accompanied by a drastic rise in trade-inhibiting policy measures, particularly after the Covid-19 pandemic and Russia’s invasion of Ukraine. In this context, the EU’s integration in the global economy via trade and value chains remains resilient thus far. Yet, a more fragmented world trade in the future would result of selected decoupling between countries, a general re-balancing towards resilience of value chains and efforts to secure access to key raw materials in lieu of efficiency. This would come at a significant cost. Global trade fragmentation in the form of an increase in trade barriers and higher trade policy uncertainty could lead to significant reduction in global output in the long-term, with low-income countries likely to be more negatively affected.

Keywords: global trade; fragmentation; geopolitical; tensions; EU; trade and value chains; Gaal; Nilsson; Tucci; Perea; Velazquez (search for similar items in EconPapers)
JEL-codes: F1 F13 F4 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2023-09
New Economics Papers: this item is included in nep-cis, nep-eec and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:075

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