“The ratio of real global trade to GDP  has leveled off since its recovery after a sharp decline during the global financial crisis (GFC).¹ Relative to industrial production (the red line), trade has continued to edge up, but the increase in this ratio is also much slower than before the crisis. The stagnation is even more evident when both trade and GDP are measured in U.S. dollars (the green line), as the ratio of nominal trade to GDP has not even re-attained its pre-GFC peak. This development likely reflects the steep fall in oil prices, which affects nominal trade more than nominal GDP. Across all these measures, the recent deceleration in trade relative to output is particularly striking because it follows nearly three decades of steady increases, most notably from 1995 through 2007. The slowdown in trade has received a great deal of attention, and it is sometimes cited as one of the reasons for the sluggishness of global output growth. However, the linkage between the two is not clear-cut. The economic literature has found a positive association between openness to trade and GDP growth at the individual country level, which is thought to result from the spread of technology as well as pressure to maximize efficiency in exporting and import-competing industries. These forces are likely to be particularly important for less-developed countries. But increasing trade is not the only way to achieve further technology dissemination and/or to improve efficiency, especially for countries whose production and financial systems are already well-integrated into the global economy. Growth in trade also involves a reallocation of resources among countries that increases global output as long as there are unexploited comparative advantages. However, it is difficult to judge the extent of such opportunities. Thus, it is not obvious whether the recent leveling-off of trade relative to GDP should be a subject of concern…”