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What is driving the weak world trade?
The last 50 years have been characterised by accelerating growth in international trade in goods and services. This has resulted in considerable welfare gains. The increase in trade intensity has flattened since the financial crisis in 2008 and the subsequent economic slowdown. Recent years' weak growth in world trade can be attributed to several factors. Hence, there are indications of a slowdown in several of the trends which previously contributed to boosting international trade. Cases in point are the deepening of global value chains and lifting of trade barriers. Other potential factors which could be dampening growth in global trade – also in future years – are both cyclical and structural shifts in aggregate demand as well as the geographical composition of growth. International trade has a positive effect on growth and prosperity. Especially small, open economies like Denmark stand to benefit from trading with other countries. The reason is that international trade gives access to larger markets, intensifies competition and offers opportunities for specialisation and knowledge sharing. In addition, free trade may result in welfare gains via higher purchasing power. For a small, open economy like Denmark it is thus crucial to have economic policy supporting free trade through international cooperation and other channels.