TRADE DEPENDENCE ON CRITICAL GOODS AND SENSITIVE INDUSTRIAL ECOSYSTEMS
(OECD-Italy’s Department of Treasury Taskforce for Multilateral Policy Support)
Main aim and contribution
• Mapping and measurement of strategic dependences for G7 and EU countries.
• Blends methodology from input-output analysis and fine-grade trade statistics.
• Overall, G7 and EU countries do not show major dependences
• However, there are few critical products whose supply depends on few third countries, notably China.
• We provide a conceptual and measurement framework to study trade dependences.
• A flexible approach readily adaptable to different trade blocs, which is paramount in the current period of enhance trade policy volatility.
Major choke-points for global manufacturing (Schwellnuss et al 2020)
China is a major chokepoint for manufacturing industries in the World. Its importance reduces significantly when we look at G7 and EU countries alone.
Main chokepoints, besides China, are from within the bloc.
Zooming in to identify critical products along supply chains of G7 and EU economies
Import-dependent goods
N = 670 with possible supply vulnerabilities
N = 642
Digital, green, health and critical raw materials (CRM) Vulnerable importdependent products
CRITICAL PRODUCTS in sensitive ecosystems
N = 61
Critical products represent 10% of all products entering sensitive ecosystems according to available lists.
The G7 and EU import share of critical goods is very limited, but most of them come from outside the area
Critical goods represent
3.7%
• Of total G7 and EU imports 0.9%
• ¼ coming from the G7 and EU area itself 2.8%
• 3/4 coming from outside the G7 and EU area
The strategic relevance of critical products is not necessarily related to their quantitative relevance!
Extra G7 and EU imports of critical goods appear to be mostly relevant for the digital ecosystem
Extra-G7 and EU share of imported critical products
The extra G7 and EU value share of imported critical products is highest in the digital ecosystem, but their sheer number is low
China dominates supply of extra-G7 and EU critical goods imports in most sensitive ecosystems
Country shares of extra-G7 and EU critical imports (%)
Number of critical goods by section in paretheses.
Summary and policy challenges
• Overall, G7 and EU countries rely on each other in terms of macro-level flows of value added. China represents however the largest choke-point both worldwide and for the G7 and EU bloc.
• Critical products are rather limited in number and import share when considering G7 and EU countries as a unique economic system, but the digital ecosystem seems particularly dependent on critical products
• The analysis confirms the dominant role of China in supplying these products, especially in areas that are relevant for the digital and green ecosystems
• Finer mapping of single products (e.g. CRM, critical intermediates) into sensitive ecosystems is desirable to evaluate their actual impact on strategic dependence and the policy options for mitigating it, while preserving a rule based and open trade system
• Policy dialogue across different ministries can help address geographical trade diversification and research into alternative technology options
THANK YOU FOR YOUR ATTENTION