Free trade between countries generates both costs and benefits, and whether or not the net benefits are positive has been a question explored by various empirical literature. The possible costs of free trade include its impact on human physical and mental health.
China’s rise as a large trading partner with many countries of the world has likely increased its human interactions with the world, as individual trade between countries can induce bilateral travel flows of individuals possibly infected with communicable diseases. Given that China has been a source of initial outbreaks of human coronavirus infections, one of the costs of trade with China could be that it increases the likelihood of infectious diseases being transmitted globally.
The analytical framework implicitly assumes that bilateral travel between countries is an input that can facilitate existing and new bilateral trade flows (Hovhannisyan and Keller, 2015). Given China’s large role in the global economy, the analysis will also inform the extent to which any complementary bilateral travel associated with or caused by bilateral trade between China and its trading partners (Shan and Wilson, 2001) is a possible channel for infectious human disease transmission risk.
As the volume of trade associated with bilateral trade between countries can trigger bilateral travel flows, resulting in cross-country arrivals of people that are possibly infected with communicable diseases, trade openness with China could be a plausible initial driver of the current COVID-19 pandemic.
This paper considered if an initial driver of the cross-country global coronavirus pandemic that followed its first reported outbreak in China was because of trade openness with China. With the most recently bilateral trade data for China and early initial cross-country counts of human coronavirus infections for China’s trading partners, I estimated simple, seemingly unrelated, and zero-inflated count data specifications of a gravity model of trade between China and its trading partners, where the number of human Coronavirus infections in a country is a function of the number of distinct good/services exported and imported from China.
The most compelling results, that control for unobserved heterogeneity, suggest that relative to the total number of early COVID-19 infections in the economies and population of China’s trading partners, the implied percentage attributed to trade with China is 5,450/22,987 or approximately 24 percent (evidence shown in attached table). There is also evidence, via a causal mediation analysis, that the implied causal pathway of cross-country travel flows of possibly infected individuals between China and its trading partners, catalyzed by bilateral trading volumes exists, and operates through the China trading volume treatment.
The findings indicate that one of the costs of trade openness and globalization is increased risk of human communicable disease such as COVID-19, being spread among trading partners. In the case of the COVID-19 pandemic of 2020, results suggest that a country’s trade volume with China was an initial driver of early COVID-19 infections in the economies and population of China’s trading partners. The estimates of the effects of trade volume with China on early COVID infections among its trading partners could be conservatively low.
The transmission of COVID-19 among a country’s population could have a latency period,
which causes initial infections to spread nonlinearly later (Liu, et al. 2020). While the results
suggest that trade with China can account for approximately 24 percent of early COVID-19 infections, as it only measured early COVID-19 infections, the percentage attributed to
trading volume China could indeed be much higher in subsequent time periods.
As for policy implications, the findings suggest that there are potential health costs associated with the bilateral trade as it also induces the bilateral flows of people among trading partners—some of whom may be infected with communicable diseases such as COVID-19.
In this context, the results suggest that countries exposed to high volumes of bilateral trade should consider prioritizing and/or establishing robust disease surveillance systems as part of their immigration and custom protocols for visitors from countries in which communicable diseases have been identified or have a history of them. This could include better global cooperation among air traffic carriers, as there is evidence that their transit networks contribute to the emergence of global disease pandemics.
Even though, the findings suggest that one of the costs of trade openness and globalization is that they can be a driver of cross-country human disease pandemics. The results failed to show evidence for the initial Coronavirus infections in Africa. The continent is one of the highest trading partners with China. However, there were very few recorded cases at the initial stages of the Corona virus human infections. This area is open to other researchers who would want to investigate the reason why the African continent recorded few cases in the initial stages of the Corona Virus human infections regardless of their strong trade relationship with China.
Seemingly Unrelated Negative Binomial with Unobserved Frailty Parameter Estimates:
Trade with China and COVID-19 Infections
Comments under attached table
The minimum AIC unshared frailty Negative Binomial parameter estimates in the attached tables show that the mean values of and were approximately 2,725 and 127, respectively. For the 181 China trading partners in the estimating sample, this implies there were 22,987 (127 x 181) early COVID-19 infections. Given the marginal effect estimate of 2 COVID infections per HSC Chinese exports/imports, based upon the average value of HCS Chinese exports/imports, this suggests that on average, 5,450 (2725 x 2) early COVID-19 infections are associated with being a Chinese trading partner.
Relative to the total number of early COVID-19 infections in the economies and population of China’s trading partners, the implied percentage attributed to trade with China is 5,450/22,987 or approximately 24 percent. This suggests that one of the costs of trade openness and globalization is exposing a substantial fraction of an economy’s population to communicable disease risk.
The author is a PhD student with a research concentration in Financial Economics, Trade, and International Development
LinkedIn: Doreen P. Adu
The paper has been published in the Journal of Economic Studies in January 2021 and the full text would be available to you upon request from the author.