Structural Changes Reshaping the World Economy and International Trade

Highly dynamic and large scale structural changes are currently reshaping the world economy and international trade. When compared to other similar experiences in the past, astonishing is not only the fast pace of global transformations, but also their wide scope affecting virtually the entire world. At the core of these changes is, undoubtedly, the shift of economic power from the industrialized economies towards the major emerging economies, particularly China and India. The forces underlying these transformations have altered the hierarchy of countries in terms of their contribution to global GDP, reversed the centres of economic growth worldwide, affected the location of manufacturing and changed dramatically the patterns of international trade. The weak and uneven economic recovery following the deepest recession in the postwar period has further accelerated the structural shifts at work in the world economy. Relying on available statistics and insights from economic literature, the present paper addresses the main trends shaping international trade over the last two decades. It takes a look at the major changes occurred in the dynamics, geographical distribution and structure of trade flows and highlights the consequences through the lens of developed and developing/emerging economies. In tackling the major forces driving structural changes in world trade, it stresses the importance of the close interaction between the dynamic expansion of global production networks operated by TNCs and the increasing integration of developing/emerging economies into these networks. While the increasing spread of global production networks is not a new phenomenon, the intensity with which it shapes the current economic reality has substantially increased in recent years. The implications of the ongoing geopolitical and economic changes are profound and manyfold both for traditional production processes and trade flows and social structures, and raise major challenges for all countries in terms of economic policy.