TRADE has changed a lot in the last 25 years. Indeed, we are still struggling to understand why trade growth was so rapid before the 2008 crisis, and has been relatively sluggish since. Richard Baldwin's new book "The Great Convergence: Information Technology and the New Globalization" was reviewed in last week's issue. But the book is so important that it is worth looking again at some of its insights.
The first is that we tend to think of competitiveness of individual states (particularly in an era of populist nationalism) - the US is competing against China and Germany. But goods are no longer assembled entirely within the bounds of one factory in one country. Instead, many goods are assembled in "global value chains" in which products are designed in one country, but made from parts built in several countries and assembled in another country. As Mr Baldwin writes
The contours of industrial competitiveness are now increasingly defined by the outlines of international production...Continue reading
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