Im­pact Se­ries: 03-23

The Sustainable Globalization Index
Historical divergence and future convergence to Sustainable Globalization

Mathilde Le Moigne
Senior Research Fellow at the Kühne Center for Sustainable Trade and Logistics at the University of Zurich

Simon Lepot
Senior Research Fellow at the Kühne Center for Sustainable Trade and Logistics at the University of Zurich

Outline

In this Kühne Impact Series we provide a historical perspective on globalizationʼs contribution to climate change, and the historical role of trade in bringing us closer to (or further away from) a sustainable world. We introduce the Sustainable Globalization Index (SGI) that tracks the worldʼs progress towards a Sustainable Globalization scenario. The SGI reveals that globalization has historically diverged from a sustainable pattern of trade until the Great Recession, but is now on a converging trend. The comparison in the recent period suggests that the (green) future of trade and logistics involves more trade from and to the economic North, more intraregional trade, and a shift of trade flows in favor of energy and raw materials and away from agricultural goods.

Full Article

At the Kühne Cen­ter for Sus­tain­able Trade and Lo­gis­tics, we ad­vo­cate that it is cru­cial to em­brace in­ter­na­tion­al trade in the fight against cli­mate change. The Kühne Cen­ter de­fines en­vi­ron­men­tal­ly sus­tain­able glob­al­iza­tion as the glob­al pat­tern of trade that would pre­vail if car­bon were priced at its so­cial cost. While this pat­tern can­not be ob­served in the data, it can be ap­prox­i­mat­ed with the help of quan­ti­ta­tive trade mod­els.

In a com­pan­ion Kühne Im­pact Se­ries, we elab­o­rate on such a quan­ti­ta­tive frame­work and sim­u­late pat­terns of pro­duc­tion and trade in the con­text of uni­form and glob­al car­bon tax.¹ One of the key mes­sages is that a uni­form glob­al car­bon tax is a high­ly ef­fi­cient tool to re­duce green­house gas emis­sions: a glob­al car­bon tax of just $100/tCO₂ would re­duce cur­rent emis­sions by 27.5%, while only cost­ing a de­cline in real in­come of 0.7%.

More­over, we show that a world where car­bon is priced at its so­cial cost is a world with sig­nif­i­cant in­ter­na­tion­al trade. There are large en­vi­ron­men­tal gains from trade aris­ing when coun­tries spe­cial­ize ac­cord­ing to their green com­par­a­tive ad­van­tage. In a world where car­bon is taxed at $100/tCO₂, we find for ex­am­ple that the share of out­put trad­ed in the brownest sec­tors (such as min­ing prod­ucts, in­dus­tri­al coal or met­als) in­creas­es in re­sponse to an in­ten­si­fy­ing of the green sourc­ing of such prod­ucts, and that the poor­er brown­er coun­tries with strong nat­ur­al re­sources (e.g., Cam­bo­dia or Chile) spe­cial­ize in their green com­par­a­tive ad­van­tage sec­tors and be­come there­fore more in­te­grat­ed to in­ter­na­tion­al trade.

In this Kühne Im­pact Se­ries, we la­bel this coun­ter­fac­tu­al world where car­bon emis­sions from pro­duc­tion and con­sump­tion are taxed glob­al­ly and uni­form­ly at $100/tCO₂ as “Sus­tain­able Glob­al­iza­tion.” We use this as our bench­mark to gauge how cur­rent and his­tor­i­cal pat­terns of in­ter­na­tion­al trade flows per­form with re­spect to what would be a sus­tain­able way of trad­ing.

To this end, we de­vel­op a new mea­sure of the dis­tance be­tween re­al­ized and sus­tain­able pat­terns of trade: the Sus­tain­able Glob­al­iza­tion In­dex (SGI). An analy­sis of this in­dex be­tween 1995 and 2018 re­veals that glob­al­iza­tion has his­tor­i­cal­ly di­verged from the pat­terns im­plied by Sus­tain­able Glob­al­iza­tion un­til the Great Re­ces­sion, but is now on a con­verg­ing trend. This di­ver­gence ap­pears to have been dri­ven by three over­lap­ping fac­tors: ex­pand­ing val­ue chains and in­ten­si­fy­ing trade in in­ter­me­di­ate in­puts, Chi­naʼs grow­ing role in world trade un­til 2006, and too in­ten­sive trade in agri­cul­tur­al goods and too lit­tle trade in en­er­gy and min­ing of raw en­er­gy prod­ucts.

The historical contribution of trade to global emissions

A nat­ur­al start­ing point to gauge how sus­tain­able trade is, is to mea­sure the his­tor­i­cal con­tri­bu­tion of in­ter­na­tion­al trade flows to glob­al car­bon emis­sions. Fig. 1 plots the share of to­tal glob­al emis­sions that have been gen­er­at­ed by the pro­duc­tion and trans­port of in­ter­na­tion­al­ly trad­ed goods and ser­vices every year be­tween 1995 and 2018, both in the re­al­ized data (blue line) and in the Sus­tain­able Glob­al­iza­tion world where car­bon is taxed at $100/tCO₂.² There are two clear mes­sages to be de­rived from this pic­ture.

Trade-em­bed­ded emis­sions have con­tributed an in­creas­ing share of glob­al emis­sions un­til the Great Re­ces­sion
Be­tween 1995 and 2018, trade-em­bed­ded emis­sions have con­tributed an av­er­age of 12.9% to glob­al emis­sions. This con­tri­bu­tion how­ev­er, has not been mo­not­o­n­ic. Fo­cus­ing first on the share of trade-em­bed­ded emis­sions from the his­tor­i­cal data, we see that in­ter­na­tion­al trade con­tributed be­tween 11% and 14,3% of glob­al emis­sions over the years. There are two clear phas­es in this evo­lu­tion. First, a “glob­al­iza­tion phase” be­tween 1995 and 2008 char­ac­ter­ized his­tor­i­cal­ly by the en­try of Chi­na to the WTO in 2001 and the suc­ces­sive ex­pan­sions of the EU.

This pe­ri­od cor­re­sponds to an in­crease in the con­tri­bu­tion of trade to glob­al emis­sions from 11.2% in 1995 to 14.3% in 2008. Sec­ond, a “de­cel­er­a­tion phase” post-Great Re­ces­sion char­ac­ter­ized by a stag­na­tion of the glob­al trade-to-GDP ra­tio and a de­cline in trade-em­bed­ded emis­sions back to 12.8% of glob­al emis­sions in 2018. Note that in this sec­ond pe­ri­od, trade-em­bed­ded emis­sions have de­clined, where­as trade vol­umes have rather stag­nat­ed than de­clined, sug­gest­ing a role for ei­ther (i) a change in the his­tor­i­cal com­po­si­tion of trade, or (ii) tech­no­log­i­cal in­no­va­tion in fa­vor of green­er tech­nolo­gies.

Trade-embedded emissions have contributed an increasing share of global emissions until the Great Recession

His­tor­i­cal­ly, Sus­tain­able Glob­al­iza­tionʼs trade-em­bed­ded emis­sions should have been larg­er
Fo­cus­ing sec­ond on the share of trade-em­bed­ded emis­sions im­plied by our mod­el with a $100/tCO₂ car­bon tax, we can im­me­di­ate­ly see that coun­ter­fac­tu­al emis­sions close­ly track base­line emis­sions but are high­er on the y-axis. On av­er­age, trade-em­bed­ded emis­sions should have rep­re­sent­ed 13.4% of glob­al emis­sions (as op­posed to 12.9%). This per­haps coun­ter­in­tu­itive re­sult is in line with the ob­ser­va­tion that more trade is need­ed in a Sus­tain­able Glob­al­iza­tion sce­nario: ex­ploit­ing coun­triesʼ green com­par­a­tive ad­van­tage by sourc­ing goods and ma­te­ri­als from their green­est ori­gins in­duces an in­crease in the share of out­put ef­fec­tive­ly trad­ed and hence a larg­er con­tri­bu­tion of trade to glob­al emis­sions. Re­call more­over, that this green sourc­ing ef­fect ac­counts for 36% of the 27.5% re­duc­tion in glob­al car­bon emis­sions in a world with a $100/tCO₂ car­bon tax.

This coun­ter­in­tu­itive re­sult re­veals the dif­fi­cul­ty of ac­cu­rate­ly mea­sur­ing and il­lus­trat­ing how a dif­fer­ent al­lo­ca­tion of in­ter­na­tion­al trade flows could con­tribute to a more sus­tain­able glob­al­iza­tion.

The Sustainable Globalization Index: an alternative measure of the environmental impact of trade

As a first pass, one can mea­sure how much of the to­tal re­duc­tion of glob­al emis­sions brought about by the car­bon tax comes from changes in the pat­tern of trade. We can mea­sure for each year the share of emis­sion re­duc­tions ob­tained sole­ly from changes in trade flows rel­a­tive to the de­cline in emis­sions from the glob­al change in gross out­put. By go­ing from a world with no car­bon price to a world with a cost of $100/tCO₂, the re­or­ga­ni­za­tion of trade pat­terns would con­tribute on av­er­age for 11.7% of the de­cline in emis­sions achieved by the car­bon tax be­tween 1995 and 2018.

An im­por­tant caveat of this con­tri­bu­tion mea­sure, how­ev­er, is that it es­sen­tial­ly re­flects the scale ef­fect that we in­tro­duced in our com­pan­ion Kühne Im­pact Se­ries: keep­ing sec­toral and ge­o­graph­i­cal al­lo­ca­tions fixed, a car­bon tax leads to a de­cline in quan­ti­ties con­sumed, pro­duced, and there­fore trad­ed. As a re­sult, the re­duc­tion of emis­sions com­ing from trade ad­just­ments cor­re­sponds most­ly to how much trade is need­ed in the sim­u­lat­ed Sus­tain­able Glob­al­iza­tion sce­nario rel­a­tive to the data.

The Sus­tain­able Glob­al­iza­tion In­dex: a mea­sure of trade al­lo­ca­tion in­de­pen­dent of scale ef­fects
In or­der to tru­ly cap­ture the role of re­al­lo­ca­tion next of any scale ef­fect, we pro­pose a new in­dex of trade sus­tain­abil­i­ty that we la­bel the “Sus­tain­able Glob­al­iza­tion In­dex” (SGI). Its pur­pose is to mea­sure how “aligned” cur­rent trade pat­terns are to an or­ga­ni­za­tion of trade un­der car­bon pric­ing at its so­cial cost. It takes the val­ue 1 if cur­rent and sim­u­lat­ed pat­terns of trade are per­fect­ly aligned and de­creas­es to­wards 0 oth­er­wise. Im­por­tant­ly, it does not de­pend on vol­umes at all, mean­ing that if cur­rent trade flows were scaled by a con­stant fac­tor, the dis­tance of the cur­rent or­ga­ni­za­tion to the “Sus­tain­able Glob­al­iza­tion” would not change. As such, it can be thought of as a com­ple­men­tary tool to mea­sure trade pat­tern­sʼ con­tri­bu­tion to glob­al emis­sions to a sim­ple mea­sure of emis­sion re­duc­tions. It has no unit (as it is an in­dex) and can there­fore only be con­sid­ered in a his­tor­i­cal per­spec­tive (as any oth­er in­dex).⁴

His­tor­i­cal­ly, trade or­ga­ni­za­tion was the fur­thest from Sus­tain­able Glob­al­iza­tion in the 2000s
Fig. 2 shows how the SGI has evolved be­tween 1995 and 2018. We can dis­tin­guish three phas­es: (i) be­tween 1995 and 2002, char­ac­ter­ized by a con­stant dis­tance be­tween re­al­ized and sus­tain­able pat­terns of trade, (ii) be­tween 2002 and 2011, marked by a rapid and sig­nif­i­cant di­ver­gence of the his­tor­i­cal trade pat­tern and the coun­ter­fac­tu­al one im­plied by a $100/tCO₂ car­bon tax, and (iii) a re­newed con­ver­gence phase af­ter 2011. Re­call that a high­er in­dex means a clos­er prox­im­i­ty of re­al­ized trade pat­terns to the sus­tain­able glob­al­iza­tion at a giv­en point in time.

To un­der­stand the his­tor­i­cal evo­lu­tion of the SGI, a first ap­proach con­sists of dif­fer­en­ti­at­ing trade in in­ter­me­di­ate in­puts – which re­flects the im­pact of val­ue chains on our per­for­mance against Sus­tain­able Glob­al­iza­tion – and trade in fi­nal con­sump­tion goods – which il­lus­trates the role of in­di­vid­u­al­sʼ con­sump­tion choic­es.

Historically, trade organization was the furthest from Sustainable Globalization in the 2000s

The his­tor­i­cal di­ver­gence of the SGI has been dri­ven by trade in in­ter­me­di­ate goods rather than trade in fi­nal con­sump­tion goods
Fig. 3 rep­re­sents the SGI cal­cu­lat­ed sole­ly based on trade flows of in­ter­me­di­ate goods. In oth­er words, fig. 3 de­picts the role of ex­pand­ing val­ue chains and the in­ter­na­tion­al or­ga­ni­za­tion of pro­duc­tions over the past 20 years on the per­for­mance of re­al­ized trade against the Sus­tain­able Glob­al­iza­tion sce­nario. Con­verse­ly fig. 4 rep­re­sents the SGI cal­cu­lat­ed sole­ly based on trade in fi­nal con­sump­tion goods. In oth­er words, fig. 4 de­picts the role of our con­sump­tion pat­terns, as in­di­vid­u­als, on the per­for­mance of in­ter­na­tion­al trade flows against the Sus­tain­able Glob­al­iza­tion ide­al.

The his­tor­i­cal evo­lu­tion of the SGI for trade in in­ter­me­di­ate in­puts is char­ac­ter­ized by a steep di­ver­gence be­tween re­al­ized trade flows and the Sus­tain­able Glob­al­iza­tion ones be­tween 1999 and 2009, and an even steep­er con­ver­gence af­ter 2009, bring­ing the SGI of 2018 back to the lev­el of the SGI of 1999. In­ter­est­ing­ly, the pe­ri­od be­tween 1995 and 2009 is of­ten de­scribed in the lit­er­a­ture as one of in­ten­si­fy­ing glob­al­iza­tion and of ex­pand­ing glob­al val­ue chains. Fig. 3 sug­gests that this phase of in­creas­ing trade in in­ter­me­di­ate in­puts cor­re­sponds to a strong di­ver­gence of re­al­ized trade flows to what would have been sus­tain­able. The Great Re­ces­sion has of­ten been iden­ti­fied as a struc­tur­al break mark­ing the be­gin­ning of a de-glob­al­iza­tion or at least “slow­bal­iza­tion.”⁵

The historical divergence of the SGI has been driven by trade in intermediate goods rather than trade in final consumption goods

Fig. 3 sug­gests that such a slow­down in in­ter­me­di­ates trade in­ten­si­fi­ca­tion may have dri­ven the sub­se­quent con­ver­gence of the SGI.

Con­verse­ly, fig. 4 re­veals that the his­tor­i­cal evo­lu­tion of the SGI for trade in fi­nal con­sump­tion goods is an ever-con­verg­ing trend from 1997 on. In oth­er words, in­di­vid­u­al­sʼ con­sump­tion pat­terns have been in­creas­ing­ly clos­er to sus­tain­able ones over time.

These two pic­tures com­pel us to be nu­anced in our con­clu­sions. While it ap­pears that ex­pand­ing val­ue chains have con­tributed to the di­ver­gence of re­al­ized trade away from Sus­tain­able Glob­al­iza­tion, the evo­lu­tion of the SGI for trade in fi­nal con­sump­tion goods re­veals that be­ing able to con­sume “glob­al­ized goods” is a key el­e­ment of con­ver­gence to­wards sus­tain­able trade.

To be able to be more pre­cise as to what in what we trade and with whom may fur­ther ex­plain our his­tor­i­cal di­ver­gence from Sus­tain­able Glob­al­iza­tion, we now turn to what char­ac­ter­izes trade flows fun­da­men­tal­ly: a prod­uct, an ori­gin, and a des­ti­na­tion.

Two main fac­tors may dri­ve the in­dex in that re­gard: (i) the ge­o­graph­ic di­rec­tion of trade flows (coun­try pairs), and (ii) the sec­toral com­po­si­tion of trade flows (and its di­ver­gence from the sus­tain­able al­lo­ca­tion of pro­duc­tion across sec­tors). Both are rep­re­sent­ed rel­a­tive to the over­all SGI in fig. 5, in the form of fo­cused in­dices. Note that these are rem­i­nis­cent of the green sourc­ing ef­fect (ori­gin-des­ti­na­tion-spe­cif­ic) and of the com­po­si­tion ef­fect (sec­tor-spe­cif­ic) in­tro­duced in our pre­vi­ous Kühne Im­pact Se­ries.

Chi­naʼs in­te­gra­tion into in­ter­na­tion­al trade played a sub­stan­tial role in the di­ver­gence from Sus­tain­able Glob­al­iza­tion pri­or to 2006
Fo­cus­ing first on the ge­o­graph­ic dis­tri­bu­tion of trade flows, a mea­sure of the dis­tance be­tween re­al­ized and coun­ter­fac­tu­al ori­gin-des­ti­na­tion trad­ing pairs (ag­gre­gat­ing all sec­tors, and con­sid­er­ing in­ter­me­di­ate in­puts and fi­nal goods to­geth­er) re­veals that the year 2002 marks a struc­tur­al break in an oth­er­wise up­ward (con­verg­ing) trend. From an in­ter­na­tion­al trade per­spec­tive, 2001 is an im­por­tant year as it marks the en­try of Chi­na in the WTO and the be­gin­ning of its grow­ing in­flu­ence as a ma­jor ex­porter. Quan­ti­ta­tive­ly, the mod­el im­plies a strong di­ver­gence be­tween the al­lo­ca­tion of trade flows be­tween coun­try pairs in the data and in the coun­ter­fac­tu­al sce­nario from 2002 to 2006, which co­in­cides with the largest de­clines in Chi­naʼs trade vol­umes in the taxed mod­el rel­a­tive to the data. Af­ter 2006, the data sug­gests that the emis­sion in­ten­si­ty of pro­duc­tion in Chi­na has in fact been con­sis­tent­ly im­prov­ing, so that the penal­ty im­posed by the car­bon tax on Chi­naʼs trade re­duces af­ter­wards.

Trade in agri­cul­tur­al goods, en­er­gy and min­ing of raw en­er­gy prod­ucts has pushed the di­ver­gence from Sus­tain­able Glob­al­iza­tion un­til 2015
Turn­ing to the analy­sis of the sec­toral com­po­si­tion of in­ter­na­tion­al trade, we find that the sec­toral com­po­si­tion of trade pat­terns has been con­stant­ly de­te­ri­o­rat­ing (i.e., di­verg­ing from the sus­tain­able ones) be­tween 1995 and 2015. The analy­sis iden­ti­fies very clear­ly three sec­tors that dri­ve the de­te­ri­o­ra­tion of the sec­toral SGI over time. First, the sec­tor of agri­cul­ture, which was too in­ten­sive­ly trad­ed in the 1990s. The re­or­ga­ni­za­tion of agri­cul­tur­al trade flows post 2000 has con­tributed to the con­ver­gence to­wards Sus­tain­able Glob­al­iza­tion. Sec­ond, the sec­tor of min­ing of raw en­er­gy prod­ucts (crude oil), whose trade in­ten­si­ty has been in­creas­ing­ly di­verg­ing from what would be de­sir­able be­fore sta­bi­liz­ing in 2005 (how­ev­er with­out fur­ther con­ver­gence af­ter­wards). And third, the sec­tor of en­er­gy (elec­tric­i­ty and gas), which has been trad­ed rel­a­tive­ly too lit­tle over time.

Tak­en to­geth­er, these two com­po­nents ex­plain why the over­all Sus­tain­able Glob­al­iza­tion In­dex is at its low­est in 2012 (in be­tween the trough of its two com­po­nents) and on a con­verg­ing trend af­ter­wards. The con­clu­sions drawn in terms of ge­og­ra­phy and sec­toral com­po­si­tion of trade also align with our com­pan­ion Im­pact Se­ries on the ne­ces­si­ty to em­brace a bet­ter way of do­ing trade.

The (green) future of international trade and logistics

As the SGI sug­gests a slow con­ver­gence to­ward Sus­tain­able Glob­al­iza­tion, we con­clude this Im­pact Se­ries with a brief overview of what is still a source of di­ver­gence be­tween re­al­ized and sus­tain­able trade at the end of our data pe­ri­od (2018), and some re­marks about the (green) fu­ture of in­ter­na­tion­al trade and lo­gis­tics.

A sus­tain­able glob­al­iza­tion would shift in­ter­na­tion­al trade to­wards the West
Fig. 6 de­picts the dif­fer­ence be­tween re­al­ized and sus­tain­able trade flows across re­gions for the year 2018. By change, we here mean the per­cent­age gap be­tween re­gion pairs trade shares in the Sus­tain­able Glob­al­iza­tion sce­nario rel­a­tive to the re­al­ized data. The col­ors are there­fore in­dica­tive of how we can ex­pect trade flows to evolve in re­sponse to stronger glob­al cli­mate ac­tion in a near fu­ture.

A sustainable globalization would shift international trade towards the West

The gen­er­al trends sug­gest­ed by fig. 6 are a de­cline of trade flows with­in the South­east (Africa, Asia with the ex­cep­tion of the Mid­dle East and South Amer­i­ca), and an in­crease of trade flows with­in the North­west (and in par­tic­u­lar Eu­rope). A few in­di­vid­ual re­gions stand out of the pic­ture: trade flows to and from Africa and Cen­tral Asia are to de­cline sub­stan­tial­ly, as in­di­cat­ed by their dark­er col­or (on av­er­age, ex­ports from Cen­tral Asia would de­cline by 11% and im­ports to Cen­tral Asia by 13%), where­as trades from and to Eu­rope (and in par­tic­u­lar West­ern Eu­rope) would re­main at their cur­rent lev­el.⁶

Note that these re­sults also sug­gest that a glob­al car­bon tax would fur­ther en­cour­age an in­crease in in­tra-re­gion­al trade. This is in line with the his­tor­i­cal con­ver­gence of the SGI we have been ob­serv­ing since the Great Re­ces­sion, in a pe­ri­od of ob­served stag­na­tion (if not con­trac­tion) of glob­al val­ue chains.

Sus­tain­able Glob­al­iza­tion im­plies a shift of trade flows in fa­vor of en­er­gy and raw ma­te­ri­als and away from agri­cul­tur­al goods
Turn­ing to the sec­toral com­po­si­tion of trade, fig. 7 de­picts what could be ex­pect­ed in terms of sec­toral trade if cli­mate ac­tion fur­ther strength­ens in the near fu­ture.

The im­por­tance of the green sourc­ing ef­fect that we de­scribe in de­tail in our com­pan­ion Kühne Im­pact Se­ries can­not be un­der­stat­ed here: the green fu­ture of glob­al­iza­tion is a glob­al­iza­tion where trade in brown sec­tors should in­ten­si­fy (de­spite over­all out­put in these sec­tors de­clin­ing) to al­low for a bet­ter and green­er sourc­ing of such prod­ucts where pos­si­ble. This is the case in par­tic­u­lar for en­er­gy (elec­tric­i­ty and gas, whose share of trad­ed out­put needs to in­crease by 30% in re­sponse to a $100/tCO₂ car­bon tax) and raw ma­te­ri­als (that need to be bet­ter sourced from coun­tries tap­ping into the green com­par­a­tive ad­van­tage pro­vid­ed by their nat­ur­al re­sources, such as Chile spe­cial­iz­ing in cop­per ex­ports). Con­verse­ly, trade in­ten­si­ty should de­cline for ser­vices – that tend to be par­tic­u­lar­ly green any­where and war­rant no green com­par­a­tive ad­van­tage – and brown sec­tors that can­not be green sourced. In that re­gard, agri­cul­ture real­ly stands out as the one brown sec­tor that should be pro­duced and con­sumed lo­cal­ly rather than (green) sourced abroad, as the fig­ure sug­gests a 10% de­cline in the share of trad­ed agri­cul­tur­al out­put in re­sponse to the car­bon tax.

More gen­er­al­ly, there is a pos­i­tive cor­re­la­tion be­tween how het­ero­ge­neous­ly green coun­tries are at pro­duc­ing a good and how in­ten­sive­ly that sec­tor ought to be trad­ed in the Sus­tain­able Glob­al­iza­tion sce­nario. In oth­er words, sec­tors that need to be trad­ed more in­ten­sive­ly in the near (green) fu­ture are sec­tors that can and need to be bet­ter sourced, where­as oth­er sec­tors should be con­sumed more lo­cal­ly, an ef­fect al­ready em­pha­sized in a pre­vi­ous Kühne Im­pact Se­ries.⁷

While cli­mate ac­tion in the form of a glob­al and uni­form car­bon tax is not nec­es­sar­i­ly on the ta­ble for the fore­see­able fu­ture, strength­en­ing cli­mate ac­tion in the form of car­bon ex­change trad­ing schemes in the largest economies glob­al­ly can al­ready be ob­served. As such, our hope is that this read on the his­tor­i­cal con­ver­gence of re­al­ized trade to­wards a sus­tain­able glob­al­iza­tion where green sourc­ing is at the core of all in­ter­na­tion­al ex­changes can be in­spir­ing for pol­i­cy-mak­ers and pri­vate busi­ness­es alike in em­brac­ing trade as a tool to fight cli­mate change.

Sustainable Globalization implies a shift of trade flows in favor of energy and raw materials and away from agricultural goods

Conclusion

In this Kühne Im­pact Se­ries, we de­fine Sus­tain­able Glob­al­iza­tion as the pat­tern of pro­duc­tion and trade that would pre­vail in a world where car­bon emis­sions are glob­al­ly and uni­form­ly taxed at $100/tCO₂. We in­tro­duced the Sus­tain­able Glob­al­iza­tion In­dex to mea­sure the his­tor­i­cal di­ver­gence be­tween the re­al­ized al­lo­ca­tion of trade flows and the al­lo­ca­tion im­plied by our Sus­tain­able Glob­al­iza­tion sce­nario.

The in­ten­si­fi­ca­tion of glob­al­iza­tion in the 2000s is char­ac­ter­ized by an in­creas­ing di­ver­gence be­tween re­al­ized trade flows and sus­tain­able pat­terns of trade. This di­ver­gence ap­pears to be dri­ven by three over­lap­ping fac­tors: ex­pand­ing val­ue chains and in­ten­si­fy­ing trade in in­ter­me­di­ate in­puts, Chi­naʼs grow­ing role in world trade un­til 2006, and too in­ten­sive trade in agri­cul­tur­al good and too lit­tle trade in en­er­gy and min­ing of raw en­er­gy prod­ucts.

A com­par­i­son be­tween re­al­ized and sus­tain­able trade in the re­cent pe­ri­ods sug­gests pre­cise­ly that the (green) fu­ture of trade and lo­gis­tics is more trade from and to rich­er and green­er re­gions of the glob­al North, more in­tra-re­gion­al trade, and a shift of trade flows in fa­vor of en­er­gy and raw ma­te­ri­als and away from agri­cul­tur­al goods.

About the Series

The Kühne Cen­ter aims to es­tab­lish it­self as a thought leader on is­sues sur­round­ing eco­nom­ic glob­al­iza­tion – by con­duct­ing rel­e­vant re­search and mak­ing its in­sights avail­able to a broad au­di­ence. The Kühne Cen­ter Im­pact Se­ries high­lights re­search-based in­sights that help to eval­u­ate the cur­rent world trad­ing sys­tem and to iden­ti­fy what works and what needs to be im­proved to achieve a tru­ly sus­tain­able glob­al­iza­tion.