Impact of the Great Thai Floods on the International Supply Chain

Abstract

The international supply chain for intermediate goods is widespread across East Asia and constitutes an important part of the global economic system. Recent natural disasters both in Japan and particularly Thailand highlighted its importance and revealed underlying structural weaknesses, as the knock-on effect of localised production disruptions caused stoppages of and delays in production and trade across Asia and beyond. In this paper we elucidate the major problems of the international supply chain by analysing detailed bilateral trade data for three key export goods. We find that the current structure of the supply chain implies that when one part of the chain is cut, the whole chain will necessarily be affected. In conclusion policy suggestions are outlined, giving ways to improve supply resilience and mitigate the impacts of frequently-occurring localised natural disasters on the regional and global economy.