Great Graphic: Trade and Tariffs–End of an Era?

This Great
Graphic
was tweeted by the Financial
Time’s John Authers
, who got it from @fathomcomment. 
The green
line is the inversion of global trade (right-hand
scale).  The blue line is a trade-weighted average global tariff
rate.  

What the chart shows is that since 1990, the decline in the average
tariff coincided with an increase in trade
(remember green line is inverted). 
However, the as chart illustrates,
around the Great Financial Crisis both trends stalled.  

I am often critical of charts that show two-time
series on two different scales as a study in curve-fitting.
  However,
this chart underscores an important point.  Global trade in goods and
services has slowed, and there is less
progress in removing tariff barriers to trade.  Part it the story is that
tariff barriers have been dramatically cut
and the more potent barriers are now often non-tariff in nature.  

The rise of populist-nationalism is
not the cause of the apparently faltering trend, but it could help fuel a
reversal. 
Some argue this means the end to globalization, but this
may confuse a particular expression of globalization with globalization as
such.   For example, although the cross-border
movement of capital and products have not surpassed the pre-crisis peak, the
levels remains high, and there is a new cross-border activity that is increasing
dramatically:  information.  Consider Skype calls, emails, and other
messaging.   

We have argued that the era ushered in by Reagan-Thatcher ended with the
Great Financial Crisis.
  It is the subject of my new book that will
be published shortly (“Political Economy of Tomorrow”). 
However, it does not necessarily mean a reversal of trade liberalization,
though it could.  Slower world growth also is a factor that weighs on
trade.  Also, import substitution in
China and the decline in many commodity
prices also may weigh on measures of trade. 

Nevertheless, many observers are concerned the US and UK are joining eastern and central Europe, as well
as Russia and China in spurring a new nationalism.
This anxiety is unlikely
to go away anytime soon.  The
optimist case is that 1) the Trump Administration is not as extreme in practice
as its rhetoric and 2) France and German provide the firewall and turn back the
populist challenge in the Spring and Fall.  However, a Le Pen victory (in
round two of the French presidential elections) would be seen as the third point (first two are thought Brexit, though
UKIP played a role, it was the Tories who engineered it, which is not a
populist party, and the US election) of a trend.   These issues will
likely be a source of anxiety for many for the next couple of quarters, at
least. 

Disclaimer

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