Trade and Global Value Chains at the Time of Covid-19

ABSTRACT

The pandemic we are experiencing is, despite its temporary nature, likely to leave a permanent sign on the global trade system. Measures to contain contagion have revealed the greater vulnerability of firms operating in global value chains (GVCs) and especially those located in first-hit countries. The risk is that production reshuffling made possible by automation will increase, and that nations will see incentives for changing the distribution of manufacturing around the globe. Furthermore, Covid-led trade restrictions may trigger a new wave of protectionism, impacting disproportionately on those countries without the manufacturing capacity to provide their populations with medical products.

KEYWORDS:

• globalisation
• global value chains
• Covid-19
• protectionism

Supplemental Material

Supplemental data for this article can be accessed here.

Acknowledgments

The authors would like to thank Nathalie Tocci and two anonymous reviewers for their comments. Errors remain their own.

Notes

¹ This article was submitted on 17 September 2020.

² See the cases of 3M, pressured by the Trump administration to limit its export of masks to Canada and Latin America, regardless of the position of Canada as one of the US’ main trade partners, or Mölnlycke, a Swedish company producing surgical masks on which the French government placed an export ban during the first weeks of the pandemic in Europe.

³ On the other hand, the CEPR-EABCN Euro Area Business Cycle Dating Committee at the time of writing reports that economic activity in the Euro area will almost certainly be substantially lower in 2020Q1 and 2020Q2 than in 2019Q4, but the cyclical designation of this period will depend on which of the possible future paths the Euro area will take thereafter, for which the Committee does not have data (Weil et al. 2020).

⁴ The main statistics have been created using input-output tables; the ones containing cross-country information are: World Input Output Database (WIOD) from the University of Groningen, EORA from the University of Sydney and Trade in Value Added (TiVA) by the OECD (World Bank 2020).

⁵ Results presented at the recent CEPR webinar on Covid-19 mentioned earlier (CEPR 2020).

⁶ USD 1,940 billion in the US alone, GBP 105 billion in the UK for increasing public spending to purchase medical supplies, help SMEs and protect jobs. In April, Japan announced a package worth almost USD 1 trillion (Bremmer 2020). South Korea allocated 40 trillion Korean won (USD 32 billion) for industries mostly damaged by the pandemic as well as an additional job protection program worth 10 trillion (Choudhury 2020).

⁷ See UNESCO (2020) and UNCTAD (2020).

⁸ The database https://www.designoftradeagreements.org is a fundamental tool for investigating the evolution of PTAs in recent decades and the strength of each agreement.

Additional information

Notes on contributors

Anna Maria Pinna

Anna Maria Pinna is Associate Professor in Political Economy at the Dipartimento di Scienze Economiche e Aziendali (DSEA) of the University of Cagliari and at the Centro Ricerche Economiche Nord Sud (CRENoS), both in Cagliari, Italy.

Luca Lodi

Luca Lodi is a PhD Candidate in Quantitative Methods for Policy Evaluation at the University of Macerata, Macerata, Italy. Email: [email protected]