Transcript Presentation

Ukraine Conflict and Czech Exports:
Consequences and New
Opportunities (China)
Michal Paulus
IES FSV UK
Vilém Semerák
CERGE-EI UK
Our Objectives
• Estimate the economic effects of the conflict in
Ukraine on Czech exports to Russia and possible
structure of foreign trade of the afflicted countries
– The change in exports caused by expected worse
economic development of Russia
• Analysis based on gravity model
– Trade potentials to China, opportunities for replacing
Czech exports to Russia by Czech exports to China
• Analysis based on gravity model
– Direct and indirect export-related change in the demand
for domestic output related to direct redistribution of
trade flows due to the sanctions
• Multi-regional IO model
Methodology
Sectors
• Machinery, motor vehicles, food products (43, 26 and 2 % of CZ export
to Russia)
1st Problem (worse economic development of Russia and CZ exports)
• Estimation and comparison of theoretical exports using the gravity
model in two scenarios:
1) Before crisis (Russian GDP growth 2 % in 2014 and 2.5 % in 2015,
January prediction of WOE, IMF)
2) After sanctions (GDP growth 0.2 % in 2014, 0.5 % in 2015)
2nd Problem (Trade potentials)
• Ratio or abs. difference between estimated and real exports
– TP= Theoret.X – Real X or TP= Theoret.X/Real X
Results I
• Loss most relevant for machinery industry followed by motor vehicles
• The loss in food products sector is negligible in 2014
• Low growth of Russian GDP prevails also in 2015. Hence we can expect similar
losses as in 2014 (the table shows cumulative loss in 2015 including losses in 2014)
• Total losses for the sectors: 102 mil. EUR (0.1 % of CZ total exports and 2 % of CZ
exports to Russia)
Food Products
Motor Vehicles
1.9
Machinery
2014
60.3
0.03%
0.14%
0.19%
13.5
403.8
174.9
4.1
2015
130.4
88.0
0.07%
0.30%
0.41%
28.9
593.9
245.0
Loss in exports
Russia (mil. EUR)
Russia (% of total CZ exports)
Most relevant partners (mil.
EUR)
Russia (mil. EUR)
Russia (% of total CZ exports)
Most relevant partners (mil.
EUR)
40.6
Results II
• China: Unutilized trade especially in motor vehicles sector
• Machinery and food products around potential
• China also does not belong to the states with the highest trade potentials (12th
highest)
• Our main trading partner (Germany) offers the highest trade potential
• Our neighbours also of highest importance (Slovakia, Poland, Austria)
Food Products
No.
Country
1 GERMANY
2 SLOVAKIA
3 RUSSIA
4 NETHERL.
5 SLOVENIA
6 SAUDI ARAB.
7 JAPAN
8 LITHUANIA
9 THAILAND
10 LEBANON
148 CHINA PR
Motor Vehicles
Trade
Trade
Potentials Potentials No.
(%)
(mil. EUR)
132%
118%
130%
125%
171%
302%
184%
153%
198%
163%
47%
307.5
244.7
22.5
18.7
16.8
12.4
12.2
12.1
11.3
10.9
-7.4
1
2
3
4
5
6
7
8
9
10
12
Country
GERMANY
SLOVAKIA
POLAND
SPAIN
HUNGARY
ROMANIA
INDIA
GREECE
CROATIA
AUSTRIA
CHINA PR
Machinery
Trade
Trade
Potentials Potentials No.
(%)
(mil. EUR)
117%
152%
150%
125%
130%
136%
155%
181%
210%
108%
159%
Country
1028.0 1 GERMANY
587.0 2 AUSTRIA
473.8 3 SLOVAKIA
166.1 4 UTD KINGDOM
107.1 5 BELGIUM
79.9
6 ITALY
76.4
7 US
60.5
8 SINGAPORE
57.0
9 IRELAND
49.8 10 NETHERL.
44.9 149 CHINA PR
Trade
Trade
Potentials Potentials
(%)
(mil. EUR)
112%
150%
128%
116%
127%
115%
118%
291%
221%
107%
92%
1947.1
701.5
575.0
406.7
261.1
226.7
168.2
163.4
159.6
152.6
-57.0
Summary
• Losses in exports towards Russia in machinery,
motor vehicles and food products are 2 % of total
CZ exports to Russia and 0.1 % of total CZ
exports.
• However losses in other markets much more
relevant – 5 times higher (0.5 % of total CZ
exports).
• Trade potential – China not the state number
one. Germany and our neighbours much more
relevant.
Analysis based on Multi-Regional
IO Model
Vilém Semerák
Methodology
• We derived a simplified world input-output table
– Based on the WIOT for 2011
– 6 + 1 countries/regions
• CR, Germany, EU25, USA, Russia, China (P.R.C.), Rest of the world
– 35 economic sectors for every country/region
• Estimates type I effects of: a) change in final demand vectors, b)
change in intermediate input requirements
– Type II effects (with induced effects) not considered at the moment
(paper)
• Advantages of the design: ability to analyze indirect flows and to
check consistency of the forecasts for all the analyzed countries
• Disadvantages:
– Lower level of detail
• Food, beverages and tobacco as one sector (15+16)
• Transport equipment as one sector (34+35)
– Slightly older data (2011)
Scenarios
• Shocks in final demand only:
– Russian final demand for Czech (+ German and EU) food,
beverages, and tobacco replaced by the same demand for
products imported
• From the “rest of the world”
• From China
• Other types of shocks can be analyzed easily (on
demand!)
• Omitted issues
– Direct reexports motivated just by the embargo
(“smuggling” via Belarus)
– Induced effects not considered in the presented version
– Elastic substitution related to changes in relative prices
– Time dimension of the adjustment – how fast is China or
another country able to replace the EU supply?
Overall Comparison: Food (15+16)
Type of Shock
Not Compensated
Compensated by
China
Compensated by
the ROW
Only Czech exports
-0.03%
xxx
xxx
All EU exports
-0.04%
xxx
xxx
All EU and US
exports
-0.04%
-0.04%
-0.04%
Overall Comparison: Complete Exports
Type of Shock
Not Compensated
If Compensated by
China
If Compensated by
the ROW
Only Czech exports
-0.91%
xxx
xxx
All EU exports
-1.14%
xxx
xxx
All EU and US
exports
-1.14%
-1.12%
-1.09%
Source: own simulations
Results: Overall Effects of the Shock on
China
China does not take over
EU & US exports (ROW)
China takes over EU & US
exports
Food exports only
0.000%
0.08%
All exports to Russia
0.01%
1.09%
Type of EU & US exports
Source: own simulations
Note: induced demand effects (type II multipliers) not considered!
Conclusions
• The export related shocks related to embargo are
small from the Czech perspective
• Effects of the embargo will be a little mitigated by
the effect that other exporters to Russia also need
inputs
– And some of these inputs come from the EU
• Obviously, the effects are China are positive but not
extremely large
• They are positive even if Chinese suppliers do not
directly replace EU and US ones directly, but they
tend to be very small
Thank you for your attention!
Appendix
Most important trading partners
Machinery
Country
Motor Vehicle
Exports, % of total
bill. EUR exports
14.751
GERMANY
2.548
FRANCE
UTD KINGDOM 2.541
1.933
RUSSIA
1.913
SLOVAKIA
1.730
NETHERL.
1.598
POLAND
1.388
AUSTRIA
1.339
ITALY
1.138
US
34%
6%
6%
4%
4%
4%
4%
3%
3%
3%
Country
GERMANY
UTD KINGDOM
SLOVAKIA
FRANCE
RUSSIA
POLAND
BELGIUM
SPAIN
ITALY
AUSTRIA
Food Products
Exports, % of total
bill. EUR exports
6.712
1.625
1.511
1.441
1.154
0.958
0.900
0.794
0.650
0.633
31%
7%
7%
7%
5%
4%
4%
4%
3%
3%
Country
SLOVAKIA
GERMANY
POLAND
AUSTRIA
HUNGARY
ITALY
UTD KINGDOM
FRANCE
NETHERL.
ROMANIA
Exports, % of total
bill. EUR exports
1.523
1.218
0.670
0.358
0.254
0.230
0.177
0.147
0.128
0.107
26%
21%
12%
6%
4%
4%
3%
3%
2%
2%
Sectors
Topic broad and complex, hence we restrict our analysis only on specific sectors:
• Machinery (electrical machinery, nuclear reactors, mechanical appliances,
televisions, sound recorders etc.) – HS codes 84-85
• Motor vehicles (cars, trucks, bicycles, etc.) – HS codes 87
• Food (animal products, vegetable products, foodstuffs) – HS codes 1-23
Sector
Total CZ
% share of ex. to % share of ex. to
exports (bill. Exports to Russia Russia on total ex. Russia on CZ total
EUR)
(bill. EUR)
to Russia
ex.
Machinery
43.77
1.93
43%
4%
Motor Vehicles
21.73
1.15
26%
5%
Food
5.77
0.09
2%
2%
Total CZ exports
to Russia (bill.
EUR)
4.48
Methodology
Consequences of worse economic development of Russia on CZ
exports
• Estimate theoretical exports using the gravity model in two
scenarios:
1) Russian GDP grows according to the January prediction of WOE:
“before crisis” scenario, 2 % in 2014, 2.5 % in 2015
2) Russian GDP grows according to the October prediction of WOE:
“after 3rd round sanctions” scenario, 0.2 % in 2014, 0.5 % in 2015
• Comparison of the results → loss of exports caused by lower
Russian GDP growth caused by sanctions and Ukraine crisis
• Comparison of the losses also with the losses regarding the most
relevant export destination countries