Implications for Trade, Incomes and Economic Vulnerability
Edited by Benno Ferrarini and David Hummels
Chapter 4: Global supply chains and natural disasters: implications for international trade
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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