Title page

Contents

Abstract 2

Acronyms/Glossary 4

Executive Summary 6

Ⅰ. Introduction 7

Ⅱ. The State of Global Economic Integration 8

Ⅲ. Transmission Channels 14

Ⅳ. The International Monetary System 19

Ⅴ. A Way Forward 25

Annex 1. Debt Reduction as Self-insurance 29

Annex 2. Risks of Fragmentation of the Global Payment System 30

Annex 3. Multilateral and Plurilateral Initiatives to Advance the Trade Agenda 31

Annex 4: International Frameworks for Consideration of Policy Measures Imposed for Security Reasons 33

References 34

Figure 1. Trade Openness, 1870-2021 8

Figure 2. Global Flows of Goods, Services and Finance 10

Figure 3. Global Production Structure: Selected Commodities, 2020 10

Figure 4. The Global Economic System, 1995 vs. 2019 11

Figure 5. Bilateral Goods Trade by Development Status, 1990-2021 11

Figure 6. Geopolitical Risks, Military Conflicts and Trade Policy Uncertainty 13

Figure 7. Trade Restrictions Imposed 13

Figure 8. National Security Mentioned in IMF AREAER Reports 13

Figure 9. Mentions of Key Terms in Corporate Presentations 13

Figure 10. Growth of GDP and Trade, 1995-2014 14

Figure 11. Creditor Base for the PRGT-eligible countries: 1996 vs. 2020 21

Figure 12. Role of Major Currencies in the International Monetary System 22

Figure 13. U.S. Dollar Share of Global Foreign Exchange Reserves and the US Dollar Index, 1999-2022:Q2 23

Figure 14. Central Banks' Demand for Gold and Foreign Holdings of US Treasury Securities 23

Figure 15. Evolution of the Global Financial Safety Net, 1995-2021 24

Figure 16. An Illustration of Pragmatic Approach to International Cooperation 26

Figure 17. Coverage and Data Availability for Selected Border and Behind-the-Border Trade Measures 27

Boxes

Box 1. Quantitative Estimates of Output Losses from GEF 16

Box Figures

Box Figure 1.1. Long-Term Losses, Percent of GDP, from Global Trade Fragmentation 17

Annex Figures

Figure 1. Debt Reduction Needed to Keep the Same Risk Exposure after an Uncertainty Shock Occurs, Debt-to-GDP Ratio 29

Figure 2. Debt Reduction for Self-Insurance Motives 29