Research Article: Network structure impacts global commodity trade growth and resilience

Date Published: February 16, 2017

Publisher: Public Library of Science

Author(s): Ali Kharrazi, Elena Rovenskaya, Brian D. Fath, Rodrigo Huerta-Quintanilla.

http://doi.org/10.1371/journal.pone.0171184

Abstract

Global commodity trade networks are critical to our collective sustainable development. Their increasing interconnectedness pose two practical questions: (i) Do the current network configurations support their further growth? (ii) How resilient are these networks to economic shocks? We analyze the data of global commodity trade flows from 1996 to 2012 to evaluate the relationship between structural properties of the global commodity trade networks and (a) their dynamic growth, as well as (b) the resilience of their growth with respect to the 2009 global economic shock. Specifically, we explore the role of network efficiency and redundancy using the information theory-based network flow analysis. We find that, while network efficiency is positively correlated with growth, highly efficient systems appear to be less resilient, losing more and gaining less growth following an economic shock. While all examined networks are rather redundant, we find that network redundancy does not hinder their growth. Moreover, systems exhibiting higher levels of redundancy lose less and gain more growth following an economic shock. We suggest that a strategy to support making global trade networks more efficient via, e.g., preferential trade agreements and higher specialization, can promote their further growth; while a strategy to increase the global trade networks’ redundancy via e.g., more abundant free-trade agreements, can improve their resilience to global economic shocks.

Partial Text

Global commodity trade is perhaps one of the most critical networks of our modern age. Given the expansion of globalization over the last centuries, trade networks have grown enormously in size and complexity. As reflected in the 17th Sustainable Development Goal [1], to accommodate the growing population and to overcome poverty, the sustainable growth and development of global trade networks is essential beyond the current state. In leveraging the comparative advantage of production by various countries, flourishing trade is a fundamental basis for economic growth. Furthermore, food [2] and energy [3] security also become critically dependent on the reliable functioning of commodity trade networks.

The ecological information-based approach is a framework for identifying holistic properties based on an analysis of the network flows of material, energy, or information. While this approach has been developed in the ecological discipline [16,17], given the significant topological and dynamic similarities in all flow systems [18,19], it has been utilized in urban management [20,21] and more recently for research focusing on economic systems [19,22,23]. In this paper, we present a novel application for analyzing the growth and resilience of growth in global commodity trade networks. The underlying assumption within this approach is that growth and development are two fundamentally distinct processes of systems. While growth reflects the extensive property, e.g., the size of the system as total system throughput (TST), development on the other hand implies organizational and intensive properties of a system. In this approach the development of systems is based on two dialectically related system-level variables of network efficiency and redundancy.

The data used for this study are based on the United Nations Commodity Trade Statistics Database (UN-Comtrade). These data represent annual global trade detailed by commodities and partner countries in nominal US dollar values. Three main classification systems are provided in the UN-Comtrade data and here we use the Harmonized System (HS), introduced in 1988, which is a detailed breakdown of products to individual categories. Given this detailed product breakdown, the HS classification is more suitable for questions concerning tariffs, customs, and trade quotas.

Evolutionary and ecological traits may advance our ability to situate the concept of resilience to our social, environmental, and economic activities and increase our capacity for sustainable development. This requires an assessment of the usefulness of the concept of resilience through empirically testable theory. In this manuscript, we demonstrate how the ecological information-based approach can reveal network properties that significantly affect growth and the resilience of growth to shocks. Similar to natural ecological systems, commodity trade networks exhibit higher growth with higher levels of efficiency and greater resilience of growth to shocks with higher levels of redundancy. This confirms a fundamental tradeoff between efficiency and growth, on one hand, and redundancy and resilience of growth on the other. While in this paper, we discuss network configurations favorable to growth and resilience of growth based on correlations, given more detailed data availability, e.g., monthly trade data, questions of causality can also be addressed in future research.

 

Source:

http://doi.org/10.1371/journal.pone.0171184

 

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