Recent academic studies show that global trade is shifting toward an axis of security and sustainability. Three major shocks have pushed the goal of maximizing efficiency to the background.
The focus of international economists is on how fragile supply chains are due to the US-China rivalry and regional conflicts. Melitz-type analyses that reward efficient firms are now looking at why chains are breaking and the long-term welfare costs of policies like friend-shoring and reshoring.
In comparison to goods trade, services and data flows are growing exponentially. Academics are working on the problems of adapting traditional trade models from the inflexible physical goods trade to digital services trade, which involves instantaneous data flow. Measuring new non-tariff barriers, such as data localization requirements, is a central challenge.
The biggest policy shift is occurring with instruments like the EU's Carbon Border Adjustment Mechanism (CBAM). This forcefully moves environmental sustainability to the center of trade policy. Research is examining whether such "green protectionism" measures are fair, their impact on development, and their compatibility with WTO rules.
