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How geopolitics is changing trade

Author

Listed:
  • Bosone, Costanza
  • Dautović, Ernest
  • Fidora, Michael
  • Stamato, Giovanni

Abstract

Rising trade tensions and a spate of policies aiming to bring national security concerns to bear in trade relations have sparked growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant. This box addresses the issue using a structural gravity model augmented with a geopolitical distance measure based on UN General Assembly voting to investigate the role played by geopolitical factors for trade in manufacturing goods over the period 2012-22. It provides evidence that the degree of geopolitical alignment is playing an increasing role in determining bilateral trade flows. The impact of geopolitical distance on trade is heterogeneous: in particular, geopolitical considerations mostly affect European trade in strategic products. JEL Classification: F10, F13, F14, F15

Suggested Citation

  • Bosone, Costanza & Dautović, Ernest & Fidora, Michael & Stamato, Giovanni, 2024. "How geopolitics is changing trade," Economic Bulletin Boxes, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:ecbbox:2024:0002:2
    Note: 2777855
    as

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    More about this item

    Keywords

    geopolitics; structural gravity models; trade barrier; trade costs; Trade fragmentation;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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