Limits to Trade Growth: Decomposing Manufacturing Trade

  •  M. Ataman Aksoy    
  •  Francis Ng    


This paper decomposes manufacturing import growth rates in 5 large industrial and 8 large developing countries and measures the relative contributions of domestic demand and market share changes for 1986/87, 1991/92, 1996/97, 2001/02, 2006/07 and 2011/12. Imports as a share of domestic value added has increased significantly over this period and account between 70 to 80 percent of import growth during this period. Exports from developing countries and especially China account for the bulk of this increase. China is an exception to this development and its import shares have not increased and have actually decreased during the last period. Finally future trade growth rates are going to decrease. We show that most of the early growth of trade was caused by trade liberalizations from almost closed economies and initial import shares were very low so that small changes led to high trade growth rates. Now that the market shares are already very high, it is almost impossible to replicate similar growth rates.

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