There is no question that the fall in trade in the spring, triggered by lockdowns and protectionist measures around the globe, was sudden and deep. In April 2020, the World Trade Organisation warned that global trade would drop by up to a third of its pre-pandemic value. The expected impact, amplified by the increasingly intertwined global supply chain, was disproportionally larger than the fall in the global economy. Some critics even pronounced globalisation dead. So much for the liberal internationalism, they said.

The gloomy prediction seemed to be standing, but only for a few months. According to the World Trade Monitor compiled by the CPB Netherlands bodog poker review Bureau for Economic Policy Analysis, cross-border flows of goods in August 2020 have already snapped back to the level seen in March. As coronavirus vaccines become available, the trade rebound is unlikely to be reversed.

The spectacular comeback of international trade is relatable for anyone who has driven on a highway. Traffic suddenly slows to a crawl or even a standstill. Moments later, you begin to move again and get back to full speed, only to wonder why there is no accident, lane closure, or any other apparent cause. This puzzle is what scientists call a “phantom traffic jam.”

In 2008, a group of Japanese researchers demonstrated in a controlled experiment that the real cause of phantom traffic jams is the drivers themselves. When a single driver on a dense highway slows down for some reason, the vehicles behind also must slow down — for their own safety. Some drivers may break unnecessarily hard, triggering even more abrupt breaks behind them. Even if the road conditions are perfectly fine, the domino effect could send a shock wave of congestion miles backwards before the leading vehicles can move again.

Goods move through the global supply chain just like vehicles running on a highway: A smooth system requires all parts to move smoothly. Every iPhone, for example, contains parts from suppliers in 43 countries across six continents. And just like bodog sportsbook review phantom traffic jams, phantom trade collapses are bound to happen every now and then. The pandemic just gave it a perfect excuse.

It is easy to criticise crisis-era measures, such as export controls and travel bans, as nationalism and protectionism. The fact that those illiberal currents do exist in many countries does not help either. However, who can really blame a driver for braking when the cars ahead suddenly slow down? When a country imposes export restrictions on hand sanitisers, it could be an unwarranted fear, but it could also be driven by a justified uncertainty over whether the needed ingredients, such as ethanol and isopropyl alcohol, are available at home or abroad. The United States, the world’s largest ethanol producer, still had a hand sanitiser shortage due to regulations that forbade its use as rubbing alcohol. Once the uncertainty is alleviated, the traffic of goods begins to flow again.

The lessons learned from the pandemic trade collapse also point to more, not less, globalisation in the future. Companies have now realised that they need a better understanding of their own supply chains and a more diverse set of suppliers across different regions, rather than from a single source, such as China. That is no different from saying that alleviating future phantom traffic bodog sportsbook review jams requires more highways, better highways, and more vigilant driving. One would be misguided to conclude from the existence of traffic that highways are a bad idea.

Just like traffics on highways, occasional, phantom trade collapses are a feature of globalisation, not a bug. Global trade after COVID-19 will never be the same. But the pandemic is far from an obituary of liberal internationalism. Instead, it is a reminder that we need to get better at it, and all signs suggest that we are.

To read the original blog post by ORF, please click here. 

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Despite the positive role trade has played, the COVID crisis has witnessed the rise of several protectionist policies (González 2020). For instance, many nations imposed export restrictions on medical supplies in an effort to boost local availability (Figure 1). And the possibilities of further and wider trade restrictions have multiplied as US-China trade tensions have reignited. 

More broadly, some policymakers are calling for greater self-reliance in general and repatriation of international supply chains in particular. The US Trade Representative Robert Lighthizer wrote last week, “businesses have been rethinking the way that overextended, overseas supply lines expose them to unacceptable risk … the era of reflexive offshoring is over… ” (Lighthizer 2020). Similar sentiments were expressed in a 17 April 2020 resolution in which the European Parliament declared it “supports the reintegration of supply chains inside the EU” (European Parliament 2020).

In this column, we argue that policies geared towards restricting exports and dismantling supply chains could backfire with negative consequences for trade in both the short and long term – and not just trade in medical equipment. Our argument is based on three facts. First, the interdependence of bodog casino national manufacturing sectors is pervasive. Second, it has grown substantially in recent years. And third, China plays a unique role in the global network of trade in intermediate inputs. 

bodog sportsbook review Export controls on medical supplies and medicines reported in 2020: 83 nations have imposed a total of 150 measures

Source: Global Trade Alert website,  https://www.globaltradealert.org/, accessed 9 May 2020.

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If the world is to ramp up the production of essential medical equipment to meet the swift rise in pandemic-driven demand, there is no alternative to international trade given the integrated nature of global manufacturing. The same is true for medicines, vaccines, and medical tests that will become important in defeating the virus. Trying to shut down this sort of supply-chain trade will simply make it harder to fight the virus for all nations.

Whatever merits there may be to addressing risk in international supply chains, pursuing this goal in the midst of a pandemic could lead to serious, unintended consequences. Pursuing policies aimed at forcing companies to alter their supply chain practices can easily lead other nations to respond. A spiral of retaliation could disrupt world productive capacity in virtually all manufacturing sectors given the high level of interdependence we documented. This could make economic recovery more challenging, to say the least. In Bodog Poker short, keeping trade channels open will help us fight the disease and help the world economy recover. 

To view the original blog post at VOX CEPR Policy Portal, please click here

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