Due to the corona virus crisis, many countries around the world are blocked. A new study has shown that a cautious approach to easing lock restrictions that reduces the risk of later locks may be better for the global supply chain in the long run.
The study, led by researchers from UCL and Tsinghua University, was published in the journal Nature Human Behavior.
This is the first peer-reviewed study to fully assess the potential global impact of COVID-19 locks on the global supply chain, and to model the impact of locks on 140 countries, including countries that are not directly affected by COVID-19.
The study found that stricter locks previously imposed – like the two-month lockout imposed in China – are more economically preferable to four or six month locks, because the lockout period is more important to economies than their severity.
This is because companies can better absorb the shock of a short lockdown by relying on reserves, and that shorter lockups are less likely to disrupt regional and global supply chains.
The researchers also found that countries that are not directly affected by Covid-19 can still suffer large losses of more than 20% of their GDP due to falling consumer demand and supply chain bottlenecks.
Open or highly specialized economies such as Caribbean countries that rely on tourism and Central Asian countries such as Kazakhstan that rely on energy exports are particularly at risk. Globalized industries that rely on hard-to-replace suppliers are also vulnerable, such as automotive manufacturing, where production is expected to decrease by up to half.
Lead author Professor Dabo Guan (UCL Bartlett School of Construction & Project Management and Tsinghua University) said: "Our study shows the ripple effects caused by blockages along global supply chains, with countries that are not directly affected by COVID-19 always suffer severe economic losses.
"While it is currently not possible to predict the actual cost of locks, our research suggests that shorter, stricter locks minimize the impact on the supply chain, while gradually easing restrictions over the course of a year can be less disruptive than rapid Restrictions removed, followed by another ban, "added Guan.
The researchers estimated that a gradual easing of the blocking measures over a period of 12 months would minimize the impact on the supply chain compared to a faster lifting of the restrictions over a period of two months, and would then introduce a second round of blocking in January next year, which would Would increase costs by one. third.
Co-author Professor Steven Davis (University of California, Irvine) said: "Our analysis quantifies the global economic benefits of robust responses to public health and suggests that economic justifications for reopening companies could backfire if they did another round of locks. "
Looking at a possible second wave, the researchers found that a strict, globally coordinated, two-month ban is economically less expensive than bans in different parts of the world at different times – a potential economic loss for the global Supply risks chains by 50% instead of 60%. This is because the economic cost of blocking goes beyond national borders and a shorter, one-time shock is easier to absorb.
Professor Guan said: "Companies will survive lockdown failures in the supply chain by relying on inventory reserves or finding new suppliers. If a second shock occurs, reserves may be low and supply chains may be recently repaired – resulting in one leads to a new interruption. " expensive."
With recurring global locks, the New Zealand food and tourism industries in Jamaica would face estimated productivity losses of around 90%, while China's electronics business and the Iranian oil industry would suffer productivity losses of around two thirds.
Meanwhile, the cost to the UK economy would increase from a potential supply chain loss from 38% (a ban was gradually eased over 12 months) to 57% (recurring global closures take place at different times in different countries).
In the United States, the cost of the financial sector would almost double with a second global lock, with the potential loss of the supply chain increasing from 33% (one lock was gradually loosened over 12 months) to 57% (recurring global locks at different times) would in different countries).
The most important factor affecting the global economic cost of closures, according to the study, was the number of countries implementing them, which highlights the importance of a country with an epidemic to the global economy.
Co-author Professor D & # 39; Maris Coffman (UCL Bartlett School of Construction & Project Management) said: "Just as people who stay at home, protect themselves and others, countries that impose strict barriers offer other countries public good.
"In preparation for the next pandemic, a global facility that is likely to be managed by the IMF could ensure that the cost of containing an outbreak is not borne by one country alone. This would remove some of the barriers to early action and offer enormous advantages. " long-term health and economic benefits, "added Coffman.
The paper used a "catastrophe footprint" economic model to quantify the direct cost of closures in terms of labor cuts, as well as the cascade effects of lost time on the supply chain, and to simulate how production restrictions affect upstream suppliers and companies on the goods is delivered. Supply chain data comes from the GTAP (Global Trade Analysis Project) database, which divides the world into 141 economies with 60 sectors in each economy.
The researchers simulated three types of blocking: strict blocking, which cuts 80% of travel and labor costs; a more moderate lockout with a 60% reduction; a third, lighter lock with a 40% reduction in travel and labor costs. The strict 80% reduction is roughly based on China's blockage, with data suggesting 80% of travel has been stopped, while the 60% block largely reflects the approach in Europe and the United States.
(This story was not edited by NDTV staff and is generated automatically from a syndicated feed.)