Resilience of International Trade to Typhoon-Related Supply Disruptions

Abstract

Shipping accidents and environmental disasters pose a challenge to the reliability of maritime supply chains. With international trade intensifying without a significant diversification of the supply routes the risk of perturbations is likely to increase, because higher atmospheric carbon dioxide provides more energy to tropical cyclones which tends to make them more destructive. In this study we analyze the regional and global economic repercussions of short-term transport disruptions of West Pacific trading routes during typhoon seasons. Using a numerical agent-based shock model with myopic local optimization, we compute the response of more than 7,000 regional economic sectors with more than 1.8 million trade- and supply relations. Disturbances due to typhoons observed between 2000-2020 are found to have caused local oversupply and scarcity situations as well as the associated regional price changes. In our model economic agents respond to these price signals and temporary supply bottlenecks by rescheduling and increasing their demand. As a consequence we find annual average export volume to increase in all trade blocs due to a decrease of export prices, but substantial regional differences emerge. Resilience of export to typhoon induced perturbations is increased in China, ASEAN, East Asia, and Europe. We trace this back to an increase of the inter-connectivity of these trade blocs to their foreign trade partners.

Keywords: Agent-based modeling, trade modeling, transport disruptions, trade resilience

JEL Classification: E17, F18, F64, R4