The potential for cascading failures in the international trade network
Heesuk Kang1,2, Kyu-Min Lee3, Jae-Suk Yang1
1Graduate School of Future Strategy, Korea Advanced Institute of Science and Technology, Daejeon, Republic of Korea.
Plos One
|March 1, 2024
Summary
Global trade networks are increasingly sensitive to disruptions, yet many countries are becoming less vulnerable due to deglobalization trends. Hidden regional trade connections significantly impact global supply chain stability.
Area of Science:
- Economics
- Network Science
- International Trade
Background:
- Conventional trade analyses often overlook multi-step transactions, failing to capture the full complexity of global supply chains.
- Understanding country influence and failure propagation in intricate trade networks is crucial for economic stability.
Purpose of the Study:
- To develop indicators quantifying country influence in complex, multi-country trade scenarios.
- To simulate failure propagation within multi-step trade networks using an agent-based model.
- To analyze trade data from 1990-2022 to identify evolving patterns of global trade influence and vulnerability.
Main Methods:
- Agent-based modeling to simulate failure propagation across trade networks.
- Development of novel indicators for quantifying country influence in multi-step trade.
- Analysis of international trade data from 1990 to 2022.
Main Results:
- Increased sensitivity to trade volume changes has intensified over time, alongside heightened interconnectedness.
- Despite increased sensitivity, many countries show reduced vulnerability, aligning with deglobalization trends.
- Significant hidden trade interactions exist between regions like Latin America and Sub-Saharan Africa, impacting network load sensitivity.
Conclusions:
- Global trade networks exhibit growing fragility but also increasing national resilience.
- Deglobalization and protectionism are reshaping the balance of influence in international trade.
- Hidden inter-regional trade dynamics necessitate a more nuanced approach to supply chain risk assessment.
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