International Trade Dynamics and Economic Integration in a Globalized Economy

In this paper, the impact of growing economic integration, reduction in trade barriers and global shocks on the dynamics of international trade is analyzed in the period between 2000 and 2024. A homogenous panel dataset of 60 countries (20 advanced, 25 emerging and 15 developing) and country fixed-effects model are used as a framework of the empirical analysis. The ratio of trade to GDP grew from 53.7% to 64.1% in advanced countries, from 34.0% to 49.1% in emerging countries and from 25.3% to 36.0% in developing countries, thus poorer nations were converging to rich countries. Each 0.10 increase in the integration index leads to almost 9.4% growth in trade intensity, while each percentage point decline in tariffs causes it to grow by about 1.6% and each unit decline in the index of non-tariff measures leads to 0.5% growth in trade intensity. Both shocks in 2009 and 2020 reduced trade by 10.5% but recovery in a year in all income classes was 15-17%. Across countries, there is a highly positive relationship (r = 0.93) between the improvements in integration and trade intensity. The findings imply that policy attention should move from tariffs alone toward regulatory convergence and resilient supply networks.