THE fall in global trade to its lowest level since 2009 is fuelling a debate over whether the slowdown is cyclical or a sign of a permanent shift in the fundamentals that have driven globalisation for decades.

Jim Newsome, chief executive of the South Carolina Ports Authority, says he would be happy with 3pc growth in cargo handled by Charleston port this year, a goal he concedes may be too ambitious. In January, container traffic at the port fell 5.1pc versus the same month of 2015, and the strong dollar is causing problems for US exporters.

“Most of the exporters that I talk to are just not doing the same business that they were a year ago,” he says.

The story is repeated and amplified far beyond Charleston. Last year saw the biggest collapse in the value of goods traded around the world since 2009 - when the impact of the global financial crisis was at its worst. Major ports such as Hamburg and Singapore have also reported slowing growth and even declining volumes. Barring a spectacular turnaround in the global economy, the subpar performance is likely to be repeated in 2016, making it the fifth straight year of lacklustre growth in global trade, a pattern not seen since the doldrums of the 1970s.

The digital economy of the 21st century is starting to overturn the old order

“It has been a very long time since trade . . . has grown this weakly,” says Robert Koopman, chief economist at the World Trade Organisation.

Much of this recent feeble performance is down to the economic slowdown in China and the knock-on effect that its declining appetite for commodities has had on other emerging markets. An anaemic recovery in Europe adds to the headwinds hitting global commerce.

While these factors explain part of the weakness in global trade, some say there are even bigger factors at work.

A growing number of economists argue that the slowdown is not merely cyclical, but a sign that the forces that have driven globalisation for decades are beginning to shift. The first big transition is China’s attempt to rebalance from a manufacturing and export-led economy towards one focused on domestic consumption.

And some economists note that the plateau in worldwide trade in goods and capital has coincided with a surge in data flows - an indicator, they say, that the digital economy of the 21st century is starting to overturn the old order.

Economists at the McKinsey Global Institute point to increased automation and new manufacturing technologies, including 3D printing, to support the argument that the change is likely to accelerate. All of which bodes badly for the future of the global trade in goods.

“The image that many of us still have in our minds of globalisation is that picture of the huge cargo container ships taking boatloads of manufactured goods from factories in far-flung places and delivering them to markets around the world,” says Susan Lund, one of the authors of a McKinsey report. “What we see in front of us is a globalisation that has morphed into a very different and more digital direction.”

Welcome to the digital world

Even as flows of finance, goods and services have slowed - falling from a peak of 53pc of global output in 2007 to 39pc in 2014 - the world has seen a surge in cross-border data. The flow of digital information around the world more than doubled between 2013 and 2015 alone, to an estimated 290 terabytes per second, McKinsey says. That figure will grow by a third again this year, meaning that by the end of 2016 companies and individuals around the world will send 20 times more data across borders than they did in 2008.

The change, McKinsey argues, goes beyond the advent of smartphones, apps, streaming services and data-hungry digital products like Facebook and Candy Crush Saga. It is already in evidence at major companies like General Electric, which is using 3D printers to make fuel nozzles for jet engines and expects its aviation unit to be manufacturing 100,000 parts using the technology by 2020.

Such innovations bring closer the day when companies make much greater use of the capacity to receive equipment not by container ship, but by a digital set of orders destined for a 3D printer.

The rise of data

McKinsey argues there are already signs of the economic value of that new form of globalisation. By its calculations cross-border flows of capital, goods, services and data added an extra $7.8tn to the global economy in 2014. The added value of data flows alone accounted for $2.8tn of that total, slightly more than the $2.7tn attributed to the global trade in goods.

The arrival of this digital economy has coincided with a shortening of global supply chains, a phenomenon that the IMFund and World Bank warned about in 2014.

In a report they said as much as half of the post-crisis slowdown in global trade could be attributed to ‘structural’ rather than cyclical reasons. Among the reasons was Beijing’s move to swallow up entire supply chains, which means Chinese manufacturers are increasingly producing many of the intermediate parts that they once imported for assembly.

McKinsey argues that those moves, replicated in the US and elsewhere, have had a global impact as carmakers and other companies have begun bringing production closer to home or concentrating it in bigger markets.

Those patterns are starting to show up in the data, with the global consumption of many finished products such as cars and pharmaceuticals outpacing trade growth in those goods in recent years, says McKinsey, while the trade in many intermediate goods like fabric and electrical parts has slowed.

There are those who still argue that the greatest drag on trade remains an old-fashioned economic downturn.

In recent years, “we have seen whammy after whammy hit the global economy,” says Bernard Hoekman, a former World Bank economist who now heads the trade and investment programme at the European University Institute near Florence. That, he argues, has an inevitable impact on trade.

Douglas Lippoldt, a senior trade economist with HSBC, says that since the global crisis, trade has lost two of its biggest drivers. “In normal times it takes at least two cylinders to get trade firing. You need consumers ... and you need investment to be firing. And so far we haven’t seen that,” he argues. The inescapable truth is that global trade has slowed and that few economists expect a rebound any time soon.

Published in Dawn, Business & Finance weekly, March 7th, 2016