Trade and the COVID-19 Pandemic: Lessons from French Firms

Trade and the COVID-19 Pandemic Lessons from French Firms Mariya Brussevich, Chris Papageorgiou, Pauline Wibaux WP/22/81 IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. 2022 MAY © 2022 International Monetary Fund WP/22/81IMF Working Paper Research Department Trade and the COVID-19 Pandemic: Lessons from French Firms Prepared by Mariya Brussevich, Chris Papageorgiou, Pauline Wibaux Authorized for distribution by Chris Papageorgiou May 2022 IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. ABSTRACT: This paper uses granular customs data from France to investigate propagation of the COVID-19 shock along the supply chains in 2020. It quantifies the effect of the COVID-19 shock on trade adjustment and identifies mitigating and amplifying factors contributing to French firms’ heterogeneous adjustment paths. Early in the pandemic, firms mainly responded to global lockdowns and spread of the virus by reducing trade volumes (intensive margin) as opposed to exiting from import and export markets (ex-tensive margin). However, adjustment along the extensive margin played a more important role in trade with developing countries. It is shown that the impact of lockdowns was stronger for final consumer goods and the trade recovery was predominantly demand-driven. More automated, inventory-intensive, older, and medium-sized firms were more insulated from the shock, whereas firms’ reliance on air transportation for shipping goods amplified the shock. Trade bans and promotion measures implemented by governments in response to the pandemic had little impact on aggregate trade flows. RECOMMENDED CITATION: Brussevich M., C. Papageorgiou and P. Wibaux. 2022. “Trade and the COVID-19 pandemic: lessons from French firms,” IMF Working Paper No. 22/81, International Monetary Fund, Washington, D.C. JEL Classification Numbers: D22; F10 Keywords: COVID-19, trade, supply chains disruptions, French firms Author’s E-Mail Address: mbrussevich@imf.org, cpapageorgiou@imf.org, pauline.wibaux@cepii.fr IMF WORKING PAPERS Trade and the COVID-19 Pandemic: Lessons from French Firms INTERNATIONAL MONETARY FUND WORKING PAPERS Trade and the COVID-19 Pandemic Lessons from French Firms Prepared by Mariya Brussevich, Chris Papageorgiou, and Pauline Wibaux1 1 We are grateful to Gita Gopinath, Bob Koopman, Isabelle Mejean, Prachi Mishra, Antonio Spilimbergo, IMF France and China Teams, and the participants of the IMF’s surveillance meeting and SPR External Sector Seminar for their comments and suggestions. This research is part of a Macroeconomic Research in Low-Income Countries project (Project ID: 60925) supported by the UK’s Foreign, Commonwealth and Development Office (FCDO). The views expressed in this paper are those of the authors and do not necessarily represent the views of the International Monetary Fund (IMF), its Executive Board, or FCDO. Contents1 Introduction32 Data63 Three trade margins of adjustment64 Econometric Specification115 Results115.1 Baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115.2 Unit values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145.3 COVID-19 shock propagation via supply chains . . . . . . . . . . . . . . . . . . . . . . . . . .145.4 Heterogeneous effects: inventory intensity and automation . . . . . . . . . . . . . . . . . . . .175.5 Heterogeneous effects: firm characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195.6 Heterogeneous effects: transportation mode . . . . . . . . . . . . . . . . . . . . . . . . . . . .225.7 Role of economic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .256 Concluding remarks27A Role of China28List of Figures1Trade margins - Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82Trade margins - Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83Trade margins by income group - Exports . . . . . . . . . . . . . . . . . . . .