Towards demystifying trade dependencies
At what point do trade linkages become a concern?
Supply chain disruptions, related to natural events or geopolitical tensions, have
in recent years prompted policy makers to identify potential vulnerabilities related
to critical trade dependencies. These are commercial links that could potentially
impose significant economic or societal harm, be a source of coercion, a risk to national
security, or disrupt strategic activities. Using three complementary methodologies
— detailed trade data analysis, input-output data techniques, and computable general
equilibrium (CGE) modelling — this paper examines the nature and evolution of trade
dependencies between the OECD countries and major non-OECD economies (MNOE). It shows
that global production has become increasingly concentrated at the product level,
with China representing 15% of import dependencies in strategic products for OECD
countries in 2020-21 compared to 4% in 1997-99. The methodologies used in this paper
unanimously demonstrate a high degree of trade interdependency between OECD and MNOE
countries. The current debate on “de-risking” international trade, therefore, needs
to carefully consider the possible costs and benefits of different policy choices.
Available from April 17, 2024
In series:OECD Trade Policy Papersview more titles