Title page
Contents
Glossary 3
Key findings and messages 7
Summary 12
Purpose and approach 12
Bilateral trade dependencies 16
Possible implications of a reduced trade between the OECD and major non-OECD countries 21
Conclusions and implications 26
1. Introduction 27
2. Literature review 28
2.1. Introduction 28
2.2. How can 'vulnerable', 'critical', 'essential' or 'strategic' products be defined? 28
2.3. Overview of methodologies used to define trade dependencies and assess their economic effects 35
2.4. Key conclusions and policy recommendations from the literature 39
3. Identifying trade dependencies using detailed merchandise trade data 41
3.1. Introduction 41
3.2. Global concentrations of imports and exports 42
3.3. Country-level concentrations of imports and exports 48
3.4. Bilateral trade dependencies 53
3.5. Conclusions from detailed trade data analysis 76
4. Measuring trade dependencies using the OECD TiVA data and ICIO techniques 77
4.1. Introduction 77
4.2. The effects of reducing bilateral trade between OECD countries and MNOES 79
4.3. Conclusions from the ICIO analysis 88
5. Modelling trade dependencies using the OECD CGE model METRO 89
5.1. Introduction 89
5.2. The effects of reducing bilateral trade between OECD countries and MNOEs 91
5.3. Conclusions from the CGE analysis 103
6. Conclusions and implications 104
7. References 105
8. Annexes 109
8.1. Annex to Chapter 3. Trade data analysis 109
8.2. Annex to Chapter 4 The ICIO-TIVA Methodology 116
8.3. Annex to Chapter 5 CGE modelling 118
Table 3.1. Counts and shares of OECD countries' and MNOEs' bilateral imports meeting different 'dependency' criteria 54
Table 3.2. Counts and shares of OECD countries' and MNOEs' bilateral exports meeting different 'dependency' criteria 54
Table 5.1. Sectors indirectly affected by the reduction in trade between OECD and CHN 102
Table 8.1. METRO Model database regions and sectors 119
Table 8.2. Per cent change in sectoral output when OECD and MNOEs reduce bilateral trade across all sectors by 10% 121
Figure 1. Critical dependency criteria 13
Figure 2. Country-level concentrations of exports and imports of strategic sector and all merchandise products 15
Figure 3. Average incidence of 'excessive import concentration' by country grouping 16
Figure 4. Bilateral import dependencies have been falling faster in the OECD than in the MNOE grouping 17
Figure 5. Regional dimension of import dependencies across OECD countries 18
Figure 6. Evolution of OECD countries' import dependencies, by major exporting country 19
Figure 7. Evolution of China's import dependencies, by major exporting country or region 21
Figure 8. Impact on GDP of selected OECD and MNOE economies: The ICIO approach 22
Figure 9. Impact on sectoral output: The CGE approach 25
Figure 2.1. Critical dependency criteria 29
Figure 3.1. Global concentration of exports and imports has been increasing prior to COVID-19 43
Figure 3.2. Thirty sectors with largest and smallest average increases in global export concentration between 1997-99 and 2017-10 44
Figure 3.3. Top thirty most and least concentrated HS sectors in 2017-19 45
Figure 3.4. Global export and import concentrations of 'strategic' products are actually lower than concentrations of all merchandise products 46
Figure 3.5. Global export and import concentrations of 'strategic' sectors 47
Figure 3.6. Evolution of global export concentration in the ten most export-concentrated 'strategic' sectors 48
Figure 3.7. Country-level concentration of exports and imports of strategic sector and all merchandise products 49
Figure 3.8. Average incidence of 'excessive' import concentration by country grouping 50
Figure 3.9. Incidence of 'excessive' import concentration in MNOEs 51
Figure 3.10. Incidence of 'excessive' import concentration in the OECD 52
Figure 3.11. Evolution of 'excessive' import concentration in the OECD 52
Figure 3.12. Incidence of 'excessive' import concentration in non-OECD and non-MNOE countries 53
Figure 3.13. Bilateral import dependencies have been falling faster in the OECD than in the MNOE grouping 55
Figure 3.14. Bilateral import dependencies in 'strategic' sectors have been falling in the OECD and increased in MNOEs 56
Figure 3.15. Bilateral import dependencies in the G7 grouping 57
Figure 3.16. Bilateral import dependencies in selected other OECD countries 58
Figure 3.17. Bilateral import dependencies in MNOE countries 59
Figure 3.18. Regional dimension of import dependencies across OECD countries 60
Figure 3.19. Regional and trans-regional dimensions of import dependencies across OECD regions - evolution in time 61
Figure 3.20. Which partners do OECD countries depend on for imports 62
Figure 3.21. Evolution of OECD countries' import dependencies, by major exporting country 63
Figure 3.22. Evolution of MNOE countries' import dependencies, by major exporting country 63
Figure 3.23. Import dependencies of OECD countries: All products and strategic products 64
Figure 3.24. Exporters accounting for the highest increase in OECD import dependencies in strategic products 64
Figure 3.25. Ranking of sectors with highest incidence of import dependencies across OECD and EU countries (average 2017-17/2020-21) 66
Figure 3.26. Shares of China as exporter in OECD's top six import dependent industries 69
Figure 3.27. Shares of China as exporter in EU's top import dependent industries 70
Figure 3.28. Individual EU countries: Similarity of sector structure of import dependencies in strategic sectors with that of the EU as a whole 71
Figure 3.29. Summary table of the Netherlands' import dependencies in strategic sectors 72
Figure 3.30. Summary table of the Netherlands' import dependencies in six strategic sectors with the highest numbers of dependencies 73
Figure 3.31. Evolution of China's import dependencies, by major exporting country or region 74
Figure 3.32. Ranking of sectors with highest incidence of import dependencies of China by exporter 76
Figure 4.1. Impact on the GDP of selected OECD economies of a 10% reduction in OECD-MNOE trade 80
Figure 4.2. Impact on the GDPs of MNOEs of a 10% reduction in trade with the OECD 80
Figure 4.3. GDP impact of the extraction scenario versus total trade with the other group 81
Figure 4.4. GDP impact decomposition by traded product 82
Figure 4.5. Distribution of value added losses across industries 83
Figure 4.6. Value added losses versus share of GDP in the EU27 84
Figure 4.7. Industry-level impacts for the Netherlands stemming from the OECD-MNOE trade disruption (selected industries) 85
Figure 4.8. Sourcing of intermediate inputs from MNOEs by OECD countries 86
Figure 4.9. Sourcing of intermediate inputs from the OECD by MNOEs 87
Figure 4.10. Industry-level total (direct and indirect) backward linkages with MNOEs in EU27's selected industries 87
Figure 4.11. Industry-level total (direct and indirect) backward linkages with MNOEs for selected Dutch industries 88
Figure 5.1. Most countries loose from the OECD-MNOE trade reduction scenario in the medium-term 92
Figure 5.2. Real GDP changes and dependence of OECD countries on MNOEs vs OECD export markets 93
Figure 5.3. Change in bilateral trade (imports by source) 94
Figure 5.4. Size of factor income decline in the Netherlands, by sector 95
Figure 5.5. Change in output, export and domestic demand 96
Figure 5.6. Output in most sectors in China and other MNOEs decline as a result of reduced trade with OECD countries 97
Figure 5.7. Sectoral output's exposure to reduced trade with China varies across regions 98
Figure 5.8. Output change and exposure to OECD strategic sector trade with China 100
Figure 8.1. Distribution of global imports by the size of bilateral import share and HHI 112
Figure 8.2. Bilateral export dependencies have been falling in the OECD and MNOE grouping 113
Figure 8.3. There are different levels and trends in bilateral export dependencies in the G7 grouping 114
Figure 8.4. As well as in other OECD countries 114
Figure 8.5. Export dependencies have been declining for MNOEs, apart from Russia 115
Figure 8.6. Regional dimension of import dependencies across EU Members 115
Boxes
Box 2.1. Related OECD work 39