Has global agricultural trade been resilient under coronavirus (COVID-19)? Findings from an econometric assessment of 2020

Abstract

Global agricultural trade, which increased at the end of 2020, has been described as “resilient” to the impacts of the COVID-19 coronavirus pandemic; however, the size and channels of its quantitative impacts are not clear. Using a reduced-form, gravity-based econometric model for monthly trade, we estimate the effects of COVID-19 incidence rates, policy restrictions imposed by governments to curb the outbreak, and the de facto reduction in human mobility/lockdown effect on global agricultural trade through the end of 2020. We find that while agricultural trade remained quite stable through the pandemic, the sector as a whole did not go unscathed. First, we estimate that COVID-19 reduced agricultural trade by the approximate range of 5 to 10 percent at the aggregate sector level; a quantified impact two to three times smaller in magnitude than our estimated impact on trade occurring in the non-agricultural sector. Second, we find sharp differences across individual commodities. In particular, we find that non-food items (hides and skins, ethanol, cotton, and other commodities), meat products including seafood, and higher value agri-food products were most severely impacted by the pandemic; however, the COVID-19 trade effect for the majority of food and bulk agricultural commodity sectors were found to be insignificant, or in a few cases, positive. Finally, we also examine the effects across low vs high income countries, the changing dynamics of the pandemic’s effect on trade flows, and the effects along the extensive product margins of trade.

International Trade Spillovers from Domestic COVID-19 Lockdowns

“…12 The original sample includes 99 importing countries which trade with 196 exporting countries. These data have been used recently to look at the recent effects of trade tensions and of the COVID-19 pandemic on trade flows (Berthou and Stumpner, 2022;Grant et al, 2021;Arita et al, 2022). Figure A3 shows that TDM covers almost the universe of goods trade, as the aggregation of all import flows account for about 95 percent of goods trade, as reported by the IMF Direction of Trade Statistics.…”

“…Since the truncation of import flows at zero biases the standard log-linear OLS approach and leads to inconsistent coefficient estimates, we follow an extensive trade literature on gravity models (Silva andTenreyro, 2006, 2022;Anderson and Yotov, 2016;Espitia et al, 2022;Arita et al, 2022;Yotov, 2022) and estimate equation 5 by Poisson pseudo-maximum likelihood (PPML), as implemented by Correia et al (2020). Standard errors are clustered at the exporter level, which is the source of variation in the stringency index.…”

“…Our paper also contributes to a large literature which analyzes the (potential) health-economy trade-offs associated with lockdowns and pandemic-related containment policies (Baqaee et al, 2020;International Monetary Fund, 2020;Aum et al, 2021). The decision to impose a lockdown, 5 A related literature investigates the disruptions in agricultural trade during the pandemic, showing that containment policies and reduced mobility are associated with the decline in bilateral trade, although the size of decline has been smaller than for non-agricultural trade and the effect of containment polices has weakened over time (Arita et al, 2022). More generally, our analysis builds on an extensive literature that measures the effects on trade flows of a variety of domestic shocks, natural disasters (Barrot and Sauvagnat, 2016;Boehm et al, 2019;Carvalho et al, 2021b) and financial sector shocks (Amiti and Weinstein, 2011).…”

The impact of COVID‐19 trade measures on agricultural and food trade

“…The coronavirus pandemic acted as a trade impediment because governments implemented public health and trade policies to combat the disease (Evenett et al, 2022 ). In response to the disease outbreak, global agricultural and food trade fell by 5% to 10% in 2020 compared to the past 4 years while the estimated trade effects are more substantial for the non‐agricultural sector (Arita et al, 2022 ). Even for countries part of the same trading block, the overall trade decreased by 5% (Barbero & José de Lucio, 2021 ).…”

“…First, we are the first to assess the impact of COVID‐19 related import facilitating and export restricting NTMs on agricultural and food trade using a credible causal inference design that relies on variation between treated and untreated varieties (product‐country pairs). Earlier studies concerned with the trade effects of COVID‐19 have overlooked the differential impacts caused by these temporary trade measures (Arita et al, 2022 ; Evenett et al, 2022 ; Lee & Prabhakar, 2021 ). Our paper is the first to show that export restricting NTMs played an essential role in shaping trade patterns of targeted varieties .…”