Chad Bown, 30 April 2021

If you had trouble in the last four years keeping up with what was happening in the trade war, you're not alone. Chad Bown tell Tim Phillips about his new paper that explains what happened, when, what it meant - and what happens next.

Hiroyasu Inoue, Yohsuke Murase, Yasuyuki Todo, 25 March 2021

The economic benefit from lifting lockdowns may depend significantly on the lockdown strategies of other regions and countries due to supply chain links. This column analyses the importance of supply chain links in this context by conducting a simulation analysis applying rich firm-level data from Japan to an agent-based model of production. It finds that the production of two regions can attain greater recovery by lifting their lockdowns together when they are closely linked through supply chains in either direction. These results point to the need for policy coordination among regions when regional governments impose or lift lockdowns.

Mariarosaria Comunale, Justas Dainauskas, Povilas Lastauskas, 09 March 2021

International trade flows are volatile, imbalanced, and fragmented across offshored supply chains. But there is still a lack of understanding about why global trade shocks, such as the Covid-19 pandemic, result in synchronised, but remarkably unequal trade flow responses across countries. This column argues that less-integrated countries focusing on arm’s-length trade experience the greatest trade flow disruptions in response to global trade shocks, while trade flows between more integrated countries relying on intermediate imports tend to dip less and bounce back more rapidly.

Chad Bown, Paola Conconi, Aksel Erbahar, Lorenzo Trimarchi, 03 February 2021

In a world in which production processes are fragmented across countries, the effects of tariffs propagate along supply chains, with firms in downstream industries suffering from protection upstream.  This column studies the effects of US antidumping duties applied against China – its most frequent target – over 1988-2016 on US firms in downstream sectors. It finds that tariffs have large negative effects on downstream industries, increasing production costs and decreasing employment, wages, sales, and investment.

Christine Arriola, Przemyslaw Kowalski, Frank van Tongeren, 15 November 2020

The Covid-19 pandemic has left in its wake a global economy damaged beyond what was thought possible a decade ago. The globalised nature of the 21st century global economy is a key component in terms of the dynamics, and effects, of the virus. This column presents an analysis of the importance of global value chains, both during the pandemic and throughout the recovery process. The results of the study suggest that increased localisation could do more harm than good, and that the international network of interconnected supply chains remains key to producing essential goods and services.

Kyle Handley, Fariha Kamal, Ryan Monarch, 01 September 2020

The rise of global supply chains means that many firms that import are also exporters. This column uses confidential firm-trade linked transaction data to identify the firms facing new US import tariffs in the period 2018-2019. It shows that product exports with higher firm-level exposure to new import tariffs had weaker export growth after 2018 than less exposed products. This impact on export growth is equivalent to an ad valorem tariff on US exports of 2-4% for the average product.

Hiromitsu Goto, Yuji Fujita, Wataru Souma, 25 August 2020

The current economic crisis calls for a pandemic-resistant supply chain network in the post-COVID-19 era. This column investigates the Japanese supply chain network at the firm level and discusses its dynamics, resilience, and robustness. It shows that the network can be characterised by a ‘walnut’ structure, with an intricately connected centre surrounded by upstream and downstream components. Despite the maturity of the Japanese economy, the network is actively changing, with fast-growing firms becoming more connected and slow-growing firms moving to the periphery. Fully understanding this structure will be crucial in making supply chain networks resilient to pandemics in the future.

James Zhan, Richard Bolwijn, Bruno Casella, Amelia U. Santos-Paulino, 13 August 2020

Global value chains will undergo a drastic transformation in the decade ahead. The change will be driven by a push for greater supply chain resilience due to COVID-19, which adds to existing pressures from the technology revolution, growing economic nationalism, and the sustainability imperative. Based on UNCTAD’s World Investment Report 2020, this column argues that the global trade and investment landscape will be reshaped by the restructuring of global chains, build-up of new regional chains, and distributed manufacturing. While these will present daunting challenges, they will also offer ample opportunities for firms and states alike and will lead to a GVC-development paradigm shift.

Frank Pisch, 30 June 2020

The Covid-19 pandemic has re-opened debate about the merits and drawbacks of highly coordinated global supply chains in manufacturing. This column documents the economic relevance, geographical properties and ownership structure of French manufacturing firms in international just-in-time supply chains – as well as potential implications for global value chains in a post-Covid-19 world. Just-in-time supply chains are likely to become more prevalent, contribute to further regionalisation of international trade, and generate an increase in multinational production.

Sébastien Miroudot, 18 June 2020

Some governments assert that global value chains create economic vulnerabilities in times of a pandemic. This column, taken from a recent Vox eBook, examines recent experiences and the risk-management literature. It concludes that it is a mistake to equate self-sufficiency with robustness – putting all the eggs in one basket is still not a good idea.  It is also a mistake to focus on production location when the imperative is to radically scale up production of vital medical supplies. Importantly, international supply chains will be needed to produce the billions of doses of COVID-19 vaccine we will soon need to manufacture and distribute. 

Anton Pichler, Marco Pangallo, R. Maria del Rio-Chanona, François Lafond, J. Doyne Farmer, 07 June 2020

Many governments are slowly unwinding their economies from nationwide lockdowns. However, re-opening the economy entails a serious trade-off between fostering economic output and keeping the spread of infection low. This column reports several re-opening scenarios for the UK economy, documenting their projected impacts on both GDP and the spread of the virus. The results suggest that it is best to re-open upstream industries first, as they provide a large direct and indirect economic boost at a relatively lower cost in terms of further epidemic spreading.

Richard Baldwin, Rebecca Freeman, 22 May 2020

International trade has helped many nations get vital medical supplies during this pandemic, yet a number of new, protectionist initiatives have been taken or discussed which could disrupt global value chains. This column presents calculations showing that national manufacturing sectors all across the globe are highly interdependent, that these connections have risen since the 2008/9 crisis, and that China is pivotal in the network of dependencies. Given this, policies that seek to hinder supply-chain trade could prove costly. 

Christopher Woodruff, 30 April 2020

Low-income countries lack the resources to replicate European-style income support programmes to alleviate the economic impact of COVID-19 lockdowns. In Bangladesh, a key challenge will be to support export-oriented production in the ready-made garment sector, which employs 4 million workers. Whether factories retain or lay off workers in response to government policies – and whether the health crisis escalates into a humanitarian crisis or not – depends crucially on decisions of foreign apparel buyers to honour or drop commitments to previously agreed orders.

Hiroyasu Inoue, Yasuyuki Todo, 16 April 2020

Cities and regions around the world are in lockdown in an attempt to contain the spread of Covid-19. This column examines how the economic effect of the lockdown of a city can propagate to other regions in the country, focusing on the case of Tokyo. The findings suggest that if Tokyo were to be locked down for two weeks, the loss in value added production in the city would be 4.3 trillion yen, while the production loss in the rest of Japan due to propagation through supply chains would be 5 trillion yen. In addition, the effect on other regions becomes progressively larger as the duration of the lockdown grows.

Yuzuka Kashiwagi, 06 December 2019

With more frequent and severe natural disasters, demand is growing for governments to support affected firms in their recovery. This column investigates the impact of subsidies after the Great East Japan Earthquake. It finds that capital subsidies were effective for the retail sector, but not in the manufacturing or other service sectors. The results suggest that the heterogeneity comes from variations in the degree of private support across sectors rather than variations in supply chain disruption.

Tetsuji Okazaki, 13 November 2019

During World War II aircraft production in Japan increased sharply. This column, part of the Vox debate on the economics of WWII, examines the reasons for this ‘production miracle’, focusing on an aircraft manufacturing plant of Mitsubishi Heavy Industries Co., one of the two largest aircraft producers in Japan. The key to the production increase was the expansion of the supplier network. Mitsubishi Heavy Industries organized many suppliers to provide aircraft parts to its plants. However, in the final stage of the war, destruction of the supplier network by strategic bombing and an earthquake caused the collapse of the company’s aircraft production.

Hiroyasu Inoue, Yasuyuki Todo, 10 September 2019

Natural disasters can have enormous economic consequences that affect firms both directly and indirectly. Using the example of the Great East Japan Earthquake, this column investigates how the propagation of shocks varies with the characteristics of supply chains. It finds that the indirect effects are far larger than the direct effects. Shocks propagate more widely and are more persistent if supply networks have complex cycles and low input substitutability.

Yi Huang, Chen Lin, Sibo Liu, Heiwai Tang, 25 June 2019

Recent studies have found that US tariffs on China have led to a significant welfare loss and significant increases in consumer prices in the US. This column, taken from a recent Vox eBook, studies firms’ equity market responses to the various tariff announcements by the US and Chinese governments in 2018 and 2019. The responses demonstrate that the structure of US–China trade is much more complex than the simplistic view of global trade that prompted the trade war, and that the winners and losers in the war depend on firms’ positioning in, and exposure to, the global value chains shared by the two countries.  

Sergi Basco, Martí Mestieri, 19 May 2019

Trade in intermediates (or ‘unbundling of production') and trade in capital have become increasingly important in last 25 years. This column shows that trade in intermediates generates a reallocation of capital across countries that exacerbates world inequality in both income and welfare. Unbundling of production hurts middle-income countries but helps those with high productivity. Trade in intermediates also increases within-country inequality, and this increase is U-shaped in the aggregate productivity level of the country. 

Wen Chen, Bart Los, Philip McCann, Raquel Ortega-Argiles , Mark Thissen, Frank van Oort, 19 December 2017

Analyses of the impact of various types of Brexit at the national level hide a lot of regional economic heterogeneity. This column deploys a new interregional dataset to quantify the shares of regional labour income that are exposed to the implications of Brexit for trade, taking into account the indirect effects of supply chain relations. The results show that much more is at stake for UK regions than for the rest of the EU, with the exception of Ireland.

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