Little is known about how adverse shocks spread through production networks. This column presents quantitative evidence on inter-firm contagion using natural disasters as exogenous instruments. Adverse shocks to upstream suppliers lower sales growth and valuation of a downstream firm.
Jean-Noël Barrot, Julien Sauvagnat, 26 February 2015
Theodore Moran, 30 January 2015
Joining international supply chains has helped some developing nations to industrialise while leaving others by the wayside. This column discusses research that extract lessons from four case studies. It suggests the key to success is combining pro-active investment promotion with customised infrastructure improvements and public-private vocational training that allow investors to fit production from a novel site seamlessly into the company’s international supplier network.
Matthias Helble, Boon-Loong Ngiang, 08 September 2014
Over the past two decades East Asia has been highly successful in building up and joining global supply chains, and has been described as Factory Asia. This column argues that East Asia, apart from being the centre of global manufacturing, is now also emerging as one of the world's leading final markets for consumption goods.
Bernard Hoekman, 19 May 2014
The World Trade Organisation is one of the most successful instances of multilateral cooperation post-WWII. Yet WTO negotiators have yet found a way to break the recent deadlock on key elements such as the market access and rule-making dimensions on the agenda since 2001. This column introduces a new CEPR book that suggests the adoption of a ‘supply chain framework’ that could help to mobilise greater support for concluding the Doha Round and provide a basis to use the WTO as a forum for learning from regional initiatives.
Marc Melitz, Stephen Redding, 10 March 2014
Recent research has sought to quantify the magnitude of the welfare gains from trade. One of the main findings from this literature is that the gains from trade are relatively modest. This column suggests a channel that the standard approach typically abstracts from. It argues that trade induces changes in domestic productivity through a more efficient organisation of production within the supply chain.
Ayako Saiki, Sunghyun Kim, 02 February 2014
Before the introduction of the euro, it was hoped that by promoting increased intra-regional trade it would increase business-cycle synchronisation within the Eurozone, and thus help it to fulfil the criteria for an optimum currency area. This column presents recent research that compares the evolution of business-cycle synchronisation in the Eurozone and east Asia. While the euro has had some impact on business-cycle synchronisation in the Eurozone, it has done so not through increased intra-regional trade intensity, but rather through some other channel – most likely financial integration.
Gary Horlick, 31 January 2014
World-leading trade lawyer, Gary Horlick, talks to Viv Davies about the 2013 WTO Bali ministerial conference and the post-Bali agenda. Horlick discusses food security, agriculture and whether mega regional trade agreements pose a threat to the future of the WTO. They also discuss the potential benefits of the post-Bali agenda for developing countries and the ‘trade transforming’ effect of SMEs and the internet. The interview was recorded in January 2014.
Alejandro Jara, 25 January 2014
Alejandro Jara talks to Viv Davies about the 2013 WTO Bali ministerial conference and the recent Vox report, ‘Building on Bali’, co-edited with Simon Evenett. Jara presents his views on the post-Bali agenda, mega regional trade agreements and trade protectionism. They also discuss the extent to which the ‘global value chain revolution’ has changed the nature and focus of international trade and trade agreements. Jara concludes by presenting policy recommendations for the way forward. The interview was recorded in January 2014.
Richard Baldwin, 20 January 2014
The global value chain revolution has changed trade and trade agreements. Trade now matters for making goods as well as selling them. Trade governance has shifted away from the WTO towards megaregional agreements. This column argues that 21st-century regionalism is not fundamentally about discrimination, and that its benefits and costs are best thought of as network externalities and harmonisation costs respectively. More research is needed to determine how the megaregional trade agreements across the Pacific and Atlantic will fit with the WTO.
Yukiko Saito, 15 December 2013
Natural disasters severely disrupt supply chains. This article presents evidence from the Great East Japan Earthquake that the spillover effects on disaster-hit firms’ suppliers were worse than those on their customers. For those firms that shut down, however, the effects on their customers were worse, and were transmitted along the supply chain. Firms with partners inside the affected area were more likely to form new business relationships, but those whose partners shut down were not. This suggests disaster relief should be targeted to the hardest-hit firms.
Rudolfs Bems, Robert Johnson, 06 December 2012
With the rise of complex, globalised supply chains is the real effective exchange rate (REER), the most commonly used measure of competitiveness, now outdated? If it is, what should replace it? This column presents a ‘Value-Added REER’ and shows that it differs substantially from the conventional REER. Because it is possible to construct a new Value-Added REER from existing data, policymakers interested in improving their understanding of competitiveness might well consider including it in their toolbox.
Matthieu Bussière, Fabio Ghironi, Giulia Sestieri, 14 February 2012
At the height of the 2008–09 financial crisis, global trade fell by far more than global output – a pattern that defied past experience and became known as the Great Trade Collapse. This column uses a new model for analysis to argue that the collapse was caused mainly by the crash in global demand.
Michael Ferrantino, 11 February 2012
As tariffs have declined steadily since the 1940s, government interventions to restrict imports have increasingly taken non-tariff forms. This column argues these add many trade costs along the supply chain and, in a world where production is fragmented across countries, they are associated with development traps. Regional initiatives and a focus on logistics measures can help bring supply chains to new parts of the world.
Henrik Isakson, 25 June 2011
In a world economy dominated by fragmented supply chains and trade in tasks, the direct contribution of exports to any national economy is overstated by gross-value measures. Since most measures do not properly account for imported inputs and severely underestimate the share of services in total exports, our view of world trade is distorted. This column says our trade policies risk being distorted too.
Hubert Escaith, Fabien Gonguet, 16 June 2009
How do firm linkages transmit shocks? This column discusses the real and financial transmission mechanisms in the supply chain and financial system that can create troublesome cascades. It applies its logic to the Asia Pacific production chain.