Covid-19 Briefing: International Trade and Supply Chains

Rebecca Freeman and Rana Sajedi

The Covid-19 pandemic has led to both a decline in economic activity that has been propagated across borders through global supply networks, and a rise in barriers to trade between countries. This has led to a rapidly emerging literature seeking to understand the effects of the pandemic on trade. This post surveys some of the key contributions of that literature. Key messages from early papers are that: i) The shock is a hit to both demand and supply, and is thus deeper than what was experienced during the 2008/09 Great Trade Collapse; ii) Global value chains have amplified cross-country spillovers; iii) When supply chains are highly integrated, protectionist measures can disrupt production of medical equipment and supplies; and, hence, iv) Keeping international trade open during the crisis can help to limit the economic cost of the pandemic and foster global growth during the recovery.

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No island is an ‘island’ in the age of GVCs

Tommaso Aquilante, Marco Garofalo and Enrico Longoni

Over the past few decades production processes have become increasingly complex and integrated across national boundaries through so-called Global Value Chains (GVCs). With increasing trade tensions and uncertainty regarding future economic integration, the 400-year old words of the English poet John Donne captured in ‘No man is an island’ seem more topical than ever. In this BU we explore the UK’s position in GVCs showing that also no island is really an island! Using a sophisticated yet intuitive decomposition of UK’s trade flows we will show how GVCs matter for the UK economy, and in particular how they seem to matter more for what we export than imports.

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