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Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West

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  • Gabriel J. Felbermayr
  • Hendrik Mahlkow
  • Alexander Sandkamp

Abstract

This Policy Brief analyses the long-run effects of an economic decoupling between the political West (i.e. the EU, the US and their allies) and the East (first and foremost Russia and China). A decoupling of Russia from the US and its allies would have much more severe long-term impacts for real income in Russia (minus 9.7 percent) than in the US and its allies (minus 0.2 percent). The reason for the uneven distribution of costs lies primarily in Russia’s low economic importance compared with the US and its allies.

Suggested Citation

  • Gabriel J. Felbermayr & Hendrik Mahlkow & Alexander Sandkamp, 2022. "Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West," EconPol Policy Brief 41, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_41
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    Cited by:

    1. Gabriel Felbermayr, 2023. "Krieg mit anderen Mitteln," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(2), pages 111-122, February.
    2. Alessandro Borin & Gianmarco Cariola & Elena Gentili & Andrea Linarello & Michele Mancini & Tullia Padellini & Ludovic Panon & Enrico Sette, 2023. "Inputs in geopolitical distress: a risk assessment based on micro data," Questioni di Economia e Finanza (Occasional Papers) 819, Bank of Italy, Economic Research and International Relations Area.
    3. Berger, Eva M. & Bialek, Sylwia & Garnadt, Niklas & Grimm, Veronika & Other, Lars & Salzmann, Leonard & Schnitzer, Monika & Truger, Achim & Wieland, Volker, 2022. "A potential sudden stop of energy imports from Russia: Effects on energy security and economic output in Germany and the EU," Working Papers 01/2022, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    4. Laaser, Claus-Friedrich & Rosenschon, Astrid, 2022. "Die Bundesausgaben in Zeiten von Corona im Fokus des Kieler Bundesausgabenmonitors: Eine Strukturanalyse," Kieler Beiträge zur Wirtschaftspolitik 41, Kiel Institute for the World Economy (IfW Kiel).
    5. Ricardo Hausmann & Ulrich Schetter & Muhammed A. Yildirim, 2022. "On the Design of Effective Sanctions: The Case of Bans on Exports to Russia," CID Working Papers 417, Center for International Development at Harvard University.
    6. Byrne, Shane & Devine, Kenneth & King, Michael & McCarthy, Yvonne & Palmer, Christopher, 2023. "The Last Mile of Monetary Policy: Inattention, Reminders, and the Refinancing Channel," Research Technical Papers 6/RT/23, Central Bank of Ireland.
    7. Felbermayr, Gabriel, 2022. "European trade policy at the service of geopolitics? Requirements for new instruments from the perspective of family businesses," Studien, Stiftung Familienunternehmen / Foundation for Family Businesses, number 273454, June.
    8. Sandkamp, Alexander-Nikolai & Stamer, Vincent & Wendorff, Falk & Gans, Steffen, 2023. "Leere Regale made in China: Wenn China beim Handel mauert," Kiel Policy Brief 164, Kiel Institute for the World Economy (IfW Kiel).
    9. Daragh Clancy & Donal Smith & Vilém Valenta, 2024. "The Macroeconomic Effects of Global Supply Chain Reorientation," International Journal of Central Banking, International Journal of Central Banking, vol. 20(2), pages 151-191, April.
    10. Simola, Heli, 2023. "What the literature says about the effects of sanctions on Russia," BOFIT Policy Briefs 8/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
    11. Josef Baumgartner & Elisabeth Christen & Gabriel Felbermayr, 2022. "Russisches Öl: Auswirkungen der EU-Sanktionen auf Österreich. Embargo oder Importzölle?," WIFO Research Briefs 14, WIFO.
    12. Balma, Lacina & Heidland, Tobias & Jävervall, Sebastian & Mahlkow, Hendrik & Mukasa, Adamon N. & Woldemichael, Andinet, 2022. "Long-run impacts of the conflict in Ukraine on food security in Africa," Kiel Policy Brief Ukraine Special 1, Kiel Institute for the World Economy (IfW Kiel).
    13. Ines Kersan-Škabić, 2023. "Some Insights into the Bilateral Value Chains—The EU and Russia," Economies, MDPI, vol. 11(7), pages 1-17, July.
    14. Felbermayr, Gabriel & Krebs, Oliver, 2023. "Der volkswirtschaftliche Schaden von Decoupling in Deutschland: Szenarien auf Bundes-, Kreis- und Sektorebene," Studien, Stiftung Familienunternehmen / Foundation for Family Businesses, number 273175, June.
    15. M. Chatib Basri & Lili Yan Ing & Günther G. Schulze, 2022. "Economic Recovery Requires Global Efforts," Chapters, in: Lili Yan Ing & Dani Rodrik (ed.), New Normal, New Technologies, New Financing, chapter 2, pages 8-21, Economic Research Institute for ASEAN and East Asia (ERIA).
    16. Borin, Alessandro & Conteduca, Francesco Paolo & Di Stefano, Enrica & Gunnella, Vanessa & Mancini, Michele & Panon, Ludovic, 2023. "Trade decoupling from Russia," International Economics, Elsevier, vol. 175(C), pages 25-44.
    17. Simon J. Evenett & Niccolò Pisani, 2023. "Geopolitics, conflict, and decoupling: evidence of Western divestment from Russia during 2022," Journal of International Business Policy, Palgrave Macmillan, vol. 6(4), pages 511-540, December.
    18. Alexander Sandkamp, 2022. "Reshoring by Decree? The Effects of Decoupling Europe from Global Value Chains," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(6), pages 359-362, November.
    19. Simola, Heli, 2022. "Trade sanctions and Russian production," BOFIT Policy Briefs 4/2022, Bank of Finland Institute for Emerging Economies (BOFIT).
    20. Sébastien Miroudot, 2024. "Comment on “Supply Chain Decoupling: Geopolitical Debates and Economic Dynamism in East Asia”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(1), pages 82-83, January.
    21. Alessandro Borin & Francesco Paolo Conteduca & Enrica Di Stefano & Vanessa Gunnella & Michele Mancini & Ludovic Panon, 2022. "Quantitative assessment of the economic impact of the trade disruptions following the Russian invasion of Ukraine," Questioni di Economia e Finanza (Occasional Papers) 700, Bank of Italy, Economic Research and International Relations Area.
    22. Du, Xiayi & Wang, Zi, 2022. "Multinationals, global value chains, and the welfare impacts of economic sanctions," Economics Letters, Elsevier, vol. 220(C).

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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