Asia and Global Production Networks

Asia and Global Production Networks

Implications for Trade, Incomes and Economic Vulnerability

Edited by Benno Ferrarini and David Hummels

This timely book deploys new tools and measures to understand how global production networks change the nature of global economic interdependence, and how that in turn changes our understanding of which policies are appropriate in this new environment. Bringing to bear an array of the latest methods and data to study global value chains, this unique book assesses the evolution of global value chains at the firm level, and how this affects competitiveness in Asia.

Chapter 4: Global supply chains and natural disasters: implications for international trade

Laura Puzzello and Paul Raschky

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, international economics

Extract

Every once in a while news reports show the disastrous impact of natural disasters on local communities. In some cases, the losses in terms of property and lives are so big that economies struggle for months, sometimes years, before bouncing back. Local production is often affected and so is the transport of local goods to other areas. There are plenty of examples of such disasters in the 1990s and more recently: the Kobe Earthquake (Japan, 1995), the 921 earthquake (Taipei,China, 1999), Hurricanes Katrina and Rita (United States, 2004), the Japanese Great Tohoku earthquake and tsunami and the Thai floods (2011). Anecdotal evidence suggests that the distinguishing feature of these recent disasters is the global scope of their effects. It is not uncommon for firms abroad to report production delays and profit losses because suppliers in source countries struck by natural disasters fail to provide parts in time. For example, the disruptions in the supply chain caused by the Great Tohoku earthquake and tsunami events in March 2011, not only forced Japanese car manufacturers to shut down their plants for a short period, but also resulted in temporary closures of a General Motors truck plant in the United States (US). However, the question arises whether these global supply chain effects are just limited to a small group of extreme cases of disaster events, or are a more systematic feature of (large) natural disasters.

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