Pandemic trade: COVID‐19, remote work and global value chains

Abstract

This paper studies the trade effects of COVID‐19 using monthly disaggregated trade data for 28 countries and multiple trading partners from the beginning of the pandemic to June 2020. Regression results based on a sector‐level gravity model show that the negative trade effects induced by COVID‐19 shocks varied widely across sectors. Sectors more amenable to remote work contracted less throughout the pandemic. Importantly, participation in global value chains increased traders’ vulnerability to shocks suffered by trading partners, but it also reduced their vulnerability to domestic shocks.

Effects of COVID-19 on trade flows: Measuring their impact through government policy responses

“…We agree with the existing literature on the negative impact of COVID-19 on trade (e.g. [ 21 , 23 ]); and also with the negative impact of previous pandemics [ 3 ]. We also find that results do not vary substantially across indices related to COVID-19, as they range between -0.009, for containment and health measures, and -0.012 for economic support.…”

“…Using monthly bilateral trade data of EU member states covering the period from June 2015 to May 2020 [ 20 ], use a gravity model framework to highlight the role of chain forward linkages for the transmission of Covid-19 demand shocks. They explain that when the pandemic spread and more prominent measures were taken, not only did demand decrease further, but labour supply shortage and production halted [ 21 ]. Find a negative impact of COVID-19 on trade growth for a sample of 28 countries and their most relevant trade partners.…”

“…A proper analysis of ex-post trade impacts related to COVID-19 requires a suitable and fruitful methodology. Gravity models can be helpful in achieving this goal, since they have recently started to incorporate monthly trade data into the analyses, albeit with empirical evidence that is still scarce and far from conclusive [ 8 , 20 , 21 ]. At the same time, several methodological issues need to be resolved adequately when using gravity models [ 22 ].…”

Influence of Consumer Affinity toward Foreign Countries on Consumers’ Regulatory Focuses

“…Meanwhile, the development of communication technology, logistics, and lowering barriers against overseas travel makes consumers feel close to different cultures, thereby increasing the number of consumers who have positive attitudes toward foreign countries (Grinstein and Riefler 2015;Grinstein and Wathieu 2012;Terasaki and Perkins 2017). Although the COVID-19 pandemic has restricted global travel and has made stay-at-home restrictions commonplace (Gössling, Scott, and Hall 2021), an increasing number of foreign products continue to be delivered globally, even during the pandemic (Espitia et al 2021).…”

Guest editorial

“…The virus has spread around the world and across borders causing the global economy a number of unbearable costs: costs of testing and contact tracing, costs of hospitalization and intensive medical care and costs of research and development of new therapies and vaccines. Moreover, it has imposed large costs in productivity loss, which in turn, has caused a huge problem in supply chains (due to the closure of businesses) and demand shock across many countries (due to decreased personal consumption, tourism, transport and other unnecessary expenditures) (Espitia et al, 2021). According to McKinsey & Company (2021), one of the health challenges created by the COVID-19 pandemic is the huge impact on global mental health.…”