Centre for Inclusive Trade Policy home pageIn 2020, the pandemic generated by the SARS-CoV-2 virus caused one of the largest and most abrupt disruptions to world trade in the last century, comparable only to the trade collapse that followed the financial crisis in 2008. This collapse followed naturally from the difficulty of locally producing, transporting, and consuming goods in the affected regions worldwide. In this paper, we study the impact of these disruptive local shocks on international trade flows during the COVID-19 pandemic and its direct implications.
We characterise changes in trade and transportation by using import customs data from Colombia and shipping information from IHS Markit Maritime. We show that imports declined 35% on average in 2020 and recovered towards 2021, mainly due to increased export prices and transportation costs. In addition, we find that in late 2020 and 2021, the main 150 ports in the world processed fewer ships, with higher delays in terms of the number of hours per ship.
We then analyse the local impact of the pandemic, complementing the data mentioned above with human mobility data from Facebook for the 27 main trading partners of Colombia (excluding Venezuela) and Baidu in the case of China. These data record changes in human mobility at disaggregated geographic levels using geolocation from cell phones. We derive two structural equations for import quantities and prices using a simple trade model with exporters selling differentiated products by city of origin, importers with love for variety, and a transportation sector. We then map demand and supply shifters to the mobility indicators mediated by an empirical elasticity. The variation in the data we use for identification comes from shocks at different locations within each exporting country and the importing country, Colombia, for each month.
We find that a 10% reduction in observed mobility at the exporter's location during the pandemic reduced import quantities by an average of 3.5% and increased import prices by 1%. On the other hand, we find that importer mobility only affected import quantities and not import prices, reducing the former by 4.1% when importer mobility declines by 10%.
In order to estimate the impact on ports, we employ changes in mobility at ports' locations and construct country-level measures weighting each port by their importance in terms of tonnage processed. We find that a 10% reduction in the mobility indicator increased the average number of hours ships spent in ports by 1.3%, and decreased the number of ships processed by 1.1%. In addition, we found that a 10% reduction in the port mobility indicator was associated with a 2.5% increase in freight unit costs to Colombia.
Finally, we employ these results to perform two exercises. First, we use the model to decompose the direct impact of the pandemic on imports into a demand, supply, and transportation component. We find that the decline in import values was mainly explained by a demand contraction at the onset of the pandemic. Later, in 2021, the shock was mainly explained by increased transportation costs. In the second exercise, we estimate the pass-through from import prices to consumer prices. We found that 57% of an average change in import prices due to mobility shocks to exporters passed directly through to consumer prices in Colombia.
In conclusion, we showed that the pandemic had a significant negative impact on international trade. To do so, we employed rich trade, transport, and mobility data at a highly disaggregated geographical level to be able to study the disruptions close to where production, consumption, and transportation shocks occur.
