The common presumption is that it will go up, but I find this question not so easy to answer. Let’s say this is over the next twenty years, will the technologies of easier cross-border trade really outrace the other progressing technologies in play? Here are a few forces suggesting the share of trade in gdp will go up:
1. More countries are attaining middle income status and higher levels of productivity. In a “balls and bins” approach to trade, there will be fewer zeros.
2. The internet makes it easier to trade across borders and also more people are learning the global language of English.
3. Social and commercial networks are increasingly global rather than local or national. I think this is the most important positive force.
4. Natural resources are becoming a higher share of gdp, and trade in those resources is especially imperative, given the materials-intensive nature of most emerging economies.
Here are a few forces suggesting the share of trade will go down:
5. Services will be a higher proportion of gdp and services are harder to trade, for both economic reasons and for legal, protectionist reasons.
6. China’s economy will become less resource-intensive. More generally the amazing global rise of China will not continue at its previous pace.
7. There already has been a lot of wage equalization across borders, and that limits future gains from additional cross-border trade. Even though average Chinese wages remain low, actually setting up an export-feasible enterprise in China today cannot be done without paying a pretty severe wage bill.
8. Robots and smart software lower the returns to investing in and trading with lower-wage nations. Put the plant in Texas.
9. The next twenty years may not be as peaceful as the last twenty years.
When you add this all up, globalization as a trend may well have peaked over the last twenty years.