The nexus between natural disasters, supply chains and trade—Revisiting the role of preferential trade agreements in disaster risk reduction

Abstract

Using data from 42 countries from the years 2000–2014, this study presents a gravity model to understand the impacts of natural disasters on global value chain (GVC) participation and to assess whether a country's preferential trade agreement (PTA) with its trading partners and the ‘depth’ of those agreements could cushion or would instead magnify the GVC effects of natural disasters. Despite strong evidence of the positive association between participation and the depth of PTA on GVC participation, the analysis finds that the impacts of disasters and the significance of their interactions with PTA participation are highly sensitive to the choice of disaster variables and econometric specifications. However, there is emerging evidence suggesting that PTA participation increases a country's vulnerability to disaster effects. This study highlights the need for current and future PTAs to better address disaster risk reduction as part of the future review and negotiations process, respectively.