Marcel Timmer, Bart Los, Robert Stehrer, Gaaitzen De Vries, 21 November 2016

The recent deceleration of world trade has been widely discussed, and many argue the relationship between trade and GDP growth is undergoing a fundamental shift. This column presents a novel framework to account for changes in the import intensity of global demand. Import intensity rose between 2000 and 2008 due to high demand for durables and to international production fragmentation. After 2011, fragmentation stopped and demand shifted to services, in particular in China. Low trade ratios are likely to persist in the near future.