Trade Crisis? What Trade Crisis?

TLDR

Belgian trade volumes fell mainly due to lower quantities and prices, not a reduction in firms or partners. The study investigates the 2008–2009 trade collapse in Belgium using firm‑level microdata. The authors analyze firm‑level microdata from Belgium to examine the trade collapse. The collapse was mainly driven by a fall in demand for tradables, with finance and global value chain involvement playing minor roles, and domestic and cross‑border operations collapsed similarly, rejecting a cross‑border trade crisis.

Abstract

We investigate the 2008–2009 trade collapse using microdata from a small open economy, Belgium. Belgian exports and imports mostly fell because of smaller quantities sold and unit prices charged rather than fewer firms, trading partners, and products being involved in trade. Our difference-in-difference results point to a fall in the demand for tradables as the main driver of the collapse. Finance and involvement in global value chains played a minor role. Firm-level exports-to-turnover and imports-to-intermediates ratios reveal a comparable collapse of domestic and cross-border operations. Overall, our results reject a crisis of cross-border trade per se.