Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession

Hubert Escaith

MPRA Paper from University Library of Munich, Germany

Abstract: Global supply chains reshaped international trade since the end 1980s and their role in the trade collapse that followed the financial crisis of September 2008 was determinant. Because production is now internationally diversified, adverse external shocks affect firms not only through final demand, but also through a rupture in the flow of inputs received from their suppliers. The future of supply chain determines also the alternative exit scenarios from the Great Recession; as a result of global rebalancing, they will probably be smaller and more regional. Left unchecked, these centripetal forces may lead to a deterioration of global governance and to deglobalization. The reshaping of global effective demand is of particular importance for the labour abundant lesser advanced developing countries that where relying on the strength of the global supply chains to attract productive investments. On the other hand, because trade in goods for processing inflated artificially some bilateral trade deficit, rebalancing them will prove easier in the short term, while the technical factors that made possible the internationalization of production will still promote further "flattening of the Earth" in the longer term.

Keywords: international trade; global supply chains; transmission channels; global rebalancing; trade and development (search for similar items in EconPapers)
JEL-codes: E32 F23 F42 G01 O19 O24 (search for similar items in EconPapers)
Date: 2009-10-28
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession (2009)
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