Asia and Global Production Networks
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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.
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Chapter 3: The vulnerability of the Asian supply chain to localized disasters

Thomas Hertel, David Hummels and Terrie L. Walmsley


There are good reasons to believe that globalization of supply chains leads to significant productivity gains for national economies. But heightened interdependence comes with a down side: shocks to one economy may create ripples, or in some cases, tidal waves which come crashing down on the economies of its trade partners. Economic shocks to global supply chains can take many forms. At the micro scale, key input suppliers may fail to meet quality and scheduling targets or simply go out of business. Shocks of this sort can be extraordinarily harmful to agents with close vertical links to the failing firm, but may have few discernible effects on the economy as a whole. In contrast, macro scale shocks such as deep recessions, wars and terrorist attacks, and large natural disasters may create widespread damage. Regrettably, there is good reason to believe that the severity of these macro scale shocks is on the rise. The Great Recession and subsequent trade collapse of 2008–2009 represents the largest downturn in international transactions on record. Climate change is expected to increase the frequency and intensity of natural disasters. And high profile terrorist attacks against vital infrastructure, waged in person or online, may significantly impede movements of goods, services and people.

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