· The share of trade in GDP has grown sharply for low- and middle-income countries as growth in trade advanced even more rapidly than their relative economic size; exports over GDP rose from a quarter to more than half of non-OECD GDP during 1994 – 2008.
· The shifting pattern of global trade has involved much larger South-South (and North-South) trade flows. Between 1994 and 2008, the South-South component of low-income country exports rose from 22 to 29 percent; the South-South component of middle-income exports rose from 33 to 46 percent during the same period.
To be sure, the growth in Southern trade has been associated with reduced trade and transport cost, WTO membership and unilateral trade reform. An important explanation, according to Hanson (2012), of why South-South commerce has surged over the last decades are expanding multi-stage global production networks. Much of the recent increase in trade appears to be the result of offshoring, with manufacturing fragmented across borders as firms have exploited comparative cost advantages. Apart from falling trade cost and expanding global production networks that are driving global trade, the greater role of emerging countries has induced a much finer degree of international specialisation than occurred previously when North-North trade predominated . Hanson’s (2012) findings emphasise the return of comparative advantage in connection with Shifting Wealth: low income countries have accentuated during the past decades their net exports in three resource or labour intensive sectors – agriculture, raw materials, and apparel and shoes – and their import surpluses in other sectors. Middle income countries have turned into net exporters of electronics, increased (slightly) net exports in the primary sectors, turned into net importers in apparel/shoes and remained so in capital intensive sectors.
Graph 1: Sector Trade Shares, Middle Income Countries
Foreign direct investment (FDI) has been a crucial vehicle in building global production chains and has been usually characterised by a predominant North-South direction; indeed, FDI sourced by OECD countries and hosted by developing countries has surged during the 2000s. Like trade, FDI flows have also been growing faster than, hence rising as a fraction of, global GDP. However, while these are by now well documented facts, the rise of outward FDI by emerging countries has been less appreciated. Outflows of FDI as a share of GDP rose over the 1994 to 2008 period from 0.2 to 2.2 percent of GDP in middle income countries, fast approaching ther 3.6 percent of GDP sourced from high-income countries in 2008.
 A consequence may be that gross trade flows (i.e., total exports) overstate net exports (corrected for intermediate imports), which might imply that some recent expansion of South-South trade, especially for manufactures, is merely a statistical artifact.