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How did trade in GVC-based products respond to previous health shocks? Lessons for COVID-19

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  • Anirudh Shingal
  • Prachi Agarwal

Abstract

Using difference-in-difference analysis, we examine how trade in GVC-based products may have responded to two previous health shocks - SARS and MERS. Our identification strategy exploits differences in the time period of severe incidence of each disease and in the coverage of trading partners that were more adversely affected than others. While we find no evidence for “reshoring” in response to each of these virus outbreaks, there is some evidence for “near-shoring” in the stylized facts on SARS. Empirical analysis also suggests geographical diversification of value chains - import shares from China and UAE declined during each outbreak, while MERS was accompanied by a fall in import concentration; these effects persisted over time for SARS suggesting that the associated value-chains were not resilient to these health shocks. The findings are observed at both the intensive (import value) and extensive (number of HS-6 products and export destinations) margins. The SARS effects are driven by lower-middle-income importers that were more integrated in GVCs, received more investment, were more competitive and were more reliant on the severely affected partners. We expect similar disruptions to GVC-trade from COVID-19, especially diversification away from China.

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  • Anirudh Shingal & Prachi Agarwal, 2020. "How did trade in GVC-based products respond to previous health shocks? Lessons for COVID-19," RSCAS Working Papers 2020/68, European University Institute.
    • Handle: RePEc:rsc:rsceui:2020/68
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    Cited by:

    1. Tondl, Gabriele, 2021. "Development in the Global South at risk: Economic and social effects of the COVID-19 pandemic in developing countries," Working Papers 65, Austrian Foundation for Development Research (ÖFSE).
    2. de Lucio, Juan & Díaz-Mora, Carmen & Mínguez, Raúl & Minondo, Asier & Requena, Francisco, 2023. "Do firms react to supply chain disruptions?," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 902-916.
    3. Artecona, Raquel & Jorge, María Fabiana, 2021. "United States supply chains resiliency: The key role Latin America and the Caribbean could play," Oficina de la CEPAL en Washington (Estudios e Investigaciones) 46875, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

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    More about this item

    Keywords

    GVC-trade; health shocks; COVID-19; reshoring; near-shoring; GVC-disruptions.;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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