Revisiting the Impacts of COVID-19 Government Policies and Trade Measures on Trade Flows: A Focus on RCEP Nations

ERIA-DP-2023-17 ERIADiscussionPaperSeries No.489 RevisitingtheImpactsofCOVID-19GovernmentPoliciesandTradeMeasuresonTradeFlows: AFocusonRCEPNations NathapornpanPiyaareekulUTTAMA AssistantProfessor,EconomicsProgram,SchoolofManagement,MaeFahLuangUniversity,ChiangRai,Thailand November2023 Abstract:ThisstudyinvestigatestheimpactsofCOVID-19governmentpoliciesandtrademeasuresontradeflowsandtraderesilienceinRegionalComprehensiveEconomicPartnership(RCEP)nationsfromthefirstquarterof2017tothefourthquarterof2022.UsingpaneldataanalysisandpenalisedPoissonPseudo-MaximumLikelihoodregression,theresultsshowthatCOVID-19containmentandhealthpoliciesimplementedbyRCEPandpartnercountriesaswellasincomesupportanddebtreliefmeasurestakenbyRCEPnationshavefavourableimpactsontradeflowsandtraderesilienceforRCEPcountries.However,COVID-19stringencymeasuresimplementedbyRCEPandpartnercountries,aswellaspartners’incomesupportanddebtreliefmeasures,haddetrimentalimpactsonthetradeflowsandtraderesilienceofRCEPcountries.RCEPtradeflowswerealsoinfluencedbyliberalisedandrestrictedtrademeasures.TheimplicationsofthesefindingsforimprovingtradeperformanceamongstRCEPnationspost-COVID-19arehighlighted. Keywords:Tradeflows;traderesilience;COVID-19governmentpolicies;temporaryCOVID-19trademeasures 1.Introduction ThesigningoftheRegionalComprehensiveEconomicPartnership(RCEP)agreement1in2020–inthemidstoftheCOVID-19pandemic–highlightedtheimportanceofregionaleconomicintegrationfortheglobaltradenetworkandupcomingeconomicrecovery(Kiyota,2022).AlthoughRCEPsignatorieshaveencompassedoverone-fourthofglobaltradeoverthelastdecade,ithasbeenchallengingforthemtomaintaintheirtradeperformanceaftertheCOVID-19pandemic.COVID-19governmentpoliciesandtrademeasureseithercausedtradedisruptionsthatloweredtraderesilience2andhinderedsustainabletrade,orsupportedtradeflows,leadingtotradecompetitiveness.3 AfewstudieshaveinvestigatedtheimpactsofCOVID-19policiesandtrademeasuresoninternationaltrade.ThefirststrandistheliteratureontheimpactofCOVID-19policies –stringency,containment,health,andeconomicsupportmeasures–oninternationaltrade.Aritaetal.(2022)andDeLucioetal.(2022)revealedthatCOVID-19stringencymeasuresnegativelyaffectedinternationaltrade,andMena,Karatzas,andHansen(2022)foundanegativerelationshipbetweenCOVID-19governmentresponsesandtraderesilience.ThesecondstrandoftheliteratureisontheimpactofCOVID-19temporaryliberalisingandrestrictivemeasuresoninternationaltrade.Evenettetal.(2021)indicatedthatCOVID-19restrictiveexportmeasuressignificantlyimpactedthenumberofimportliberalisationmeasures,enablingachangeintraderesilience. RCEPmembers’tradegrowthin2020fellby3.17%;in2021,itrecoveredby27.42%,althoughCOVID-19governmentpoliciesandtrademeasureshadbeenimposed(UNCTAD,2022)(Figure1). 1TheRCEPisafreetradeagreementamongstthe10AssociationofSoutheastAsianNations(ASEAN)MemberStatesandfiveoftheirfreetradeagreementpartners:Australia,China,Japan,RepublicofKorea,andNewZealand.TheRCEPagreementaimstoreducetradebarriers,improvetradefacilitation,andcreateamorefavourablebusinessclimateforallmembercountries.Itencompassestradeingoodsandservices,investment,intellectualproperty,competition,andgovernmentprocurement. 2Traderesilienceisacountry’sabilitytoresistandtorecoverfromdisruptionsininternationaltrade(Mena,Karatzas,andHansen,2022). 3Tradecompetitivenessisacountry’sabilitytosellgoodsonglobalmarketsunderfreeandfairconditions(Farole,Reis,andWagle,2010). 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% 201620172018 Trade 2019 Tradegrowth 2020 2021 Figure1:BilateralTradeFlowsinRCEPNations RCEP=RegionalComprehensiveEconomicPartnership. Source:UNCTAD,https://unctadstat.unctad.org/EN/Index.html(accessed15November2022),andauthor’scalculations. Moreover,therelationshipamongstbilateraltradeflowsofRCEPmembers,theirCOVID-19stringencyindices,andCOVID-19trademeasureswasremarkable.ThemonthlytradeflowstendedtochangeinthesamedirectionasCOVID-19trademeasuresratherthanCOVID-19stringencymeasures(Figure2). 350 300 250 200 150 100 50 0 600 500 400 300 200 100 0 COVIDtrademeasures(max=308;min=0) Stringencyindex(max=74;min=5) Bilateraltrade(max=525;min=247) Figure2:RCEPTradeFlows,COVID-19StringencyIndex,andCOVID-19TradeMeasures Jan/20Feb/20Mar/20Apr/20May/20Jun/20Jul/20Aug/20Sep/20Oct/20Nov/20Dec/20Jan/21Feb/21Mar/21Apr/21May/21Jun/21Jul/21Aug/21Sep/21Oct/21Nov/21 Dec/21 RCEP=RegionalComprehensiveEconomicPartnership. Source:Haleetal.(2021);ITC,TrackingofCOVID-19TemporaryTradeMeasures,https://m.macmap.org/covid19;andauthor’scalculations. TheaforementionedfactsandstudiesprovideempiricalevidenceoftheimpactsofCOVID-19governmentpoliciesandtrademeasuresoninternationaltradeflows.However,thedebateisnotover.Specifically,COVID-19governmentpoliciesandtrademeasuresmayhaveimpactedtradeflowsinpartnerordestinationcountries.Moreover,partners’governmentpoliciesandtrademeasuresmayhaveaffectedchangesinahomecountry’strade. ThisstudythusanalyseshowCOVID-19governmentpol