In times when many countries are trying to recover after a global financial crisis, a report from the McKinsey Global Institute refutes the common myth that mature economies are losing out to emerging markets in trade and thus face increasing trade deficits.
To revive anemic growth in the aftermath of the global financial crisis, policy makers in many mature economies are working to increase investment and net exports, hoping to sustain growth and employment at a time when domestic consumption looks to remain weak. They are focusing on manufacturing in particular, amid a perception that these countries are losing ground to emerging markets. But efforts to stimulate manufacturing and exports may raise the risk of protectionism.
It's important for the debate on trade and its impact to be rooted in facts. With this point in mind, a report from the McKinsey Global Institute (MGI)—Trading myths: Addressing misconceptions about trade, jobs, and competitiveness—analyzes the performance of the mature economies' tradable sectors. We found that reality is often at odds with conventional wisdom. For example:
Myth: Mature economies are losing out to emerging markets in trade and thus face increasing trade deficits.
Reality: The trade balance of mature economies has remained largely stable in the aggregate and even begun to improve. There are wide variations between individual countries, but no evidence supports claims of a wholesale deterioration of the trade balance between the mature and emerging economies over the past decade.