04MARCH2024

ISSUE04/2024

WORKINGPAPER

GLOBALSUPPLYCHAINS:

LESSONSFROMADECADE

OFDISRUPTION

LUCALéRYMOFFATANDNICLASFREDERICPOITIERS

Thispaperexploresboththecharacterandimpactofthreerecentshockstoglobalsupplychains:theCOVID-19pandemic,theRussianinvasionofUkraineandtheUS-China

tradewar.Thesewerelargeshockswhichhavehadsignificantimpactsondomesticand

internationalsupplychains,buttheseimpactshavedifferedintheirlongevity,economic

impactandpolicyresponses.Weshowthatsupplychainswereremarkablyresilientagainstshocksofsuchmagnitude.However,thisresiliencewasalsoachievedthankstotheequallyremarkablesizeandscopeofpolicyresponsesandglobalsupplychainreorganisation.

Werecommendthatpre-emptivepoliciesmaybejustifiedtoshieldhouseholdsandindustryfromfutureshocks.Giventheentanglednatureoftheseshocksandthattheireffectscontinuetoreverberate,weemphasisetheneedforextensivefutureresearchtounderstandthenatureoftheseshocksandtheeffectivenessofpolicyresponses.

LucaLéryMoffat(luca.moffat@)isaResearchAnalystatBruegelNiclasPoitiers(niclas.poitiers@)isaResearchFellowatBruegel

Recommendedcitation:

LéryMoffat,L.andN.Poitiers(2024)‘Globalsupplychains:lessonsfromadecadeofdisruption’,WorkingPaper04/2024,Bruegel

1

Contents

1Introduction 2

2COVID-19 2

2.1Timelineofeconomice?ects 3

2.2Pricevolatilityandshortages 6

2.3Policyresponsesandtheaftermath 7

3TheRussianinvasionofUkraine 8

3.1Energyshock 8

3.2Agriculture 12

3.3Inperspective:theshockandtheresponse 17

4TheChina-UStradewar 18

4.1TheTrump-Bidentradewars 18

4.2Thechipwars 19

4.3Theimpact 20

5Policylessonsfromadecadeoftradeshocks 22

References 23

2

1Introduction

Afterdecadesofrapidexpansionofglobalsupplychains,thelastdecadehasseenaseriesofmajorshocksthatdisruptedtheirfunctioning.TheChina-UStradewar,COVID-19andtheRussianinvasionofUkrainehavealldisrupted?owsofgoodsacrossborders,leadingbusinessleadersandpolicymakerstoquestionthewisdomofrelyingontheglobalnetworkofsupplychains.Asaresult,variouspolicieshavebeenenactedwiththeexplicitgoalofreshapingvaluechains,diversifyingoroutrightreshoringsupplychains.However,fundamentalquestionsaboutthenatureoftheseshocksremain.

Thispaperrevisitsthee?ectsofthreeshocksonthefunctioningofglobalsupplychains.We?rstlookatthedisruptionoftheCOVID-19pandemic,theninvestigatetheimpactoftheRussianinvasionof

Ukraine,beforediscussingtheUS-Chinatradedisputeandtheensuing‘technologicalcoldwar’.The

aimistoidentifylessonsabouthowpoliciescanadapttopreventdisruptionandtomitigatethee?ectoffutureshocks.Weareinterestedbothinthemagnitudeofshocksaswellastheirlastinge?ects.InthecasesofthepandemicandtheRussianinvasionofUkraine,themagnitudeoftheshockwasveryhigh,butdissipatedrelativelyquickly.Ontheotherhand,theUS-Chinatradewarhasbeenaprotractedshiftinglobaltrade,withenormousrami?cationsforsupplychainsandcitizens.Whilethelengthofashockdetermineswhethertheeconomicdamageisenduring,evenashortshockcancreate

signi?cantpolitical-economyproblems.Thismeans,thateveniflong-termgrowthtrendsarenotdisruptedforextendedperiods,theupheavalcausedbysuddenlargeshockmightstillwarrantthecostsofmitigationmeasures.

Meanwhile,themechanismsthroughwhichmarketsreactedwerequitedi?erentacrosssectors.Boththepandemicandthewarincreasedscarcityinmanymarkets.Whilethiswasoftendescribedas

‘shortages’,itwasnotalwaysashortageinthenarroweconomicde?nition.Economistsonlydescribesomethingasashortageifthepricemechanismbreaksdownandagoodbecomesunavailable,evenforthosewillingtopayahighprice.Highpricesre?ectingscarcityleadtoeconomicallye?cient

allocationofresourcesandsetincentivesfornewproducerstoentermarkets.Butthismechanismcanalsohavepoliticallyandeconomicallyundesirablee?ects.Forinstance,agovernmentmightwanttoprotectconsumersfrompricespikesinheatingcoststhatcouldpriceoutvulnerableconsumers.

Meanwhile,businessesthatfacehighpricevolatilitycouldstruggletoful?lcontractswith?xedpricesandriskreputationaldamageiftheytransmitpricespikestoconsumers.

ThispaperispartoftheReThinkGSCproject,whichstudieshowsupplychainsareadaptingtoaneweraofmorecontentiousglobalpolitics,climatechangeandthegrowingimportanceofservicesfortrade.

2COVID-19

TheCOVID-19pandemicwasamajorshocktotheworldeconomy.Inresponsetotheoutbreakofthepandemic,countriesclosedtheirborders,andgovernmentsforcedfactoriesandpersonal-servicesproviderstoceaseoperation,andimposedlockdownsontheirpopulations.Amidlargeuncertainty,

3

companiesadaptedtheirsupplystrategiesandconsumersshiftedconsumptionpatterns.Meanwhile,governmentsinadvancedeconomiesenactedmajoreconomicstimulusprogrammestosupporttheireconomiesandmitigatetheeconomicimpactofthepandemic.Thiscocktailofeconomicshiftshadmajorglobalimplicationsandcreatedunexpectedcircumstancesforcompaniesengagedinglobal

valuechains.

Oncethepandemiceased,therewasamajordiscussiononwhethersupplychainshavebecometoofragile.Wearguethatsupplychainsprovedremarkablyresilientinthefaceofashockofsuch

magnitude.WhiletheoverlappingofthepandemicandtheRussianinvasionofUkrainemakea?nalassessmentdi?cult,thesupply-chainrelatede?ectsofthepandemicseemtohavedissipatedwithinonlyafewyears.Whilethemagnitudeoftheshockwaslarge,itwasrelativelyshort-lived.

2.1Timelineofeconomiceffects

InJanuaryandFebruary2020,countriesclosedtheirborderstoforeigntravellersinresponsetotheoutbreakofthepandemicinChinaandtheglobalspreadthatfollowed.Asdomesticcasesgrew

exponentiallyregardless,countriesimposeddomesticlockdowns.BytheendofMarch2020over100countrieshadresortedtolockdownmeasures

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,signi?cantlyimpactingtheabilityofthelocal

economytofunction.Evenwheremovementwasnotentirelycurtailed,householdsrestrictedtheirmovementsandbusinessesresortedtoworkingfromhome

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.

Theensuingsupply-chaindisruptionsandnegativedemandshockmanifesteddi?erentlyacross

sectors.IntheEU,sectorsrequiringphysicalproximity,suchasthecreativeandhospitalityindustries,

wereimpactedseverely,whereasthepharmaceuticalanddigitalsectorssawrelativelysmallcontractions(DeVetetal,2021).Butoverall,the?rstwavesawsigni?cantincreasesin

unemploymentandreductionsinoutputfromimportantindustries

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.

Governmentsinadvancedeconomiesenactedhugestimulusprogrammestosupporthouseholdsandindustry.Thesecameindi?erentvarieties.IntheEU,manygovernmentsfocusedonsustaining

existingworkrelationshipsbyimplementingjob-retentionschemes(ArnoldandKammer,2021).EUcountriesalsodisbursedstateaidtocompaniesofvariouskindstohelpthemsurvivetheeconomicdownturn.TheUS,ontopofothermeasures,disbursed$293billionincashhandoutstotaxpayersaspartofthe$2.3trillionCARESAct

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.IntheEU,additionalspendingbymemberstatesin2020was

estimatedat3.3percentofGDP

5

.

1SeeBBC,‘Coronavirus:Theworldinlockdowninmapsandcharts’,BBCNews,6April2020,availableat

/news/world-52103747.

2ThiswasdocumentedforalargenumberofcountriesbytheGoogleMobilityReports,whichusedsmartphonedatatomeasurewherepeoplespendtheirtimeduringthepandemic.Availableat

/covid19/mobility/.

3ForasummaryontheEUduringtheearlypandemic,seeMarcusetal(2021).

4IMFCOVID-19policytracker,availableat

/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19.

5SeeEuropeanCommissionmemoof3March2021,‘Questionsandanswers:Communicationon?scalpolicyresponsetocoronaviruspandemic’,

https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_885.

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Ineconomicterms,thepandemicmeantasimultaneoussupplyandademandshock.Demand

decreasedbecauseofuncertaintyamongstconsumersandbusinesses,whichledtodecreased

investmentandconsumptionexpenditureoverall.However,thepicturewasmixed.Thesimpleinabilitytoacquirecertainin-personservicesdestroyedcertaintypesofconsumption,whereastheshiftto

remoteworkboosteddemandforICTgoodsthatenabledthedigitalisationofworkprocesses.Paralleltothenegativedemandshock,thecombinationofhighlevelsofuncertaintyregardingfutureincome,thesuppressionofconsumerspendingopportunitiesandincomeoremploymentsupportprovidedbygovernmentsledtoanaccumulationoflargesavings

(Figure1)

(Attinasietal,2021).Intheeuroarea,highersavingsweremostlydrivenbylowerconsumption(Dosscheetal,2021).

Figure1:Pandemic-periodhouseholdsavingsrate(%)

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—EuropeanUnion-27countries(from2020)

—Euroarea–20countries(from2023)

Source:BruegelbasedonEurostatdatasetnasq_10_ki.

Thesupplyshockresultedfromdi?cultyinproducinggoodsariginsfromfactoryclosuresand

logisticalhurdlesinshippinggoodsacrossborders.Certaingoodsbecamedi?culttoprocure,as

demandforthemsurgedorbecausecrucialstepsofthesupplychainbecamedisrupted.Theinabilitytoacquirepersonalservicesledtoashiftofconsumptioninfavourofgoods

.Figure2a

showsthelargedropinconsumptionofboth(non-food)goodsandservicesresultingfromdomesticandforeign

disruption.Italsoshowsthequickrecoverymadebygoodsrelativetoservices.

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Figure2:Pandemicretailturnoverofnon-foodproducts(exceptfuel)andservicesintheEU27

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(a)Retailsaleofnon-foodproducts(exceptfuel)

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(b)Serviceactivities

Accommodation

Foodandbeverageserviceactivities

Source:BruegelbasedonEurostatdatasetsSTS_TRTU_MandSTS_SETU_M.Note:Index(2015=100),Monthlydata,calendarandseasonallyadjusted.

Theincreaseindemandforgoodstogetherwithlogisticaldi?cultiesledtoasurgeinratesforfreight(UNCTAD,2021).Forexample,inLosAngeles,thesurgeindemandfortradedgoodstogetherwithhighnumbersofsickworkersduringthepandemicledtolongwaitingperiodsforshipsintheport

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.Similarproblemswereexperiencedaroundtheworldandweredirectlyre?ectedinthecostsofshipping.

Figure3

showsthefreightratesfortheshippingofastandard40-footcontainerfromShanghaito

RotterdamandtoLosAngeles.TheshippingratesfromChinatoEuropeincreasedfromaround$2000tomorethan$14000,aseven-foldincreaseinthecost.

6AndrewO’Reilly,‘Stalledships,stressedcrews:CovidbuyingboomoverwhelmsLAports’,TheGuardian,11March2021,

/us-news/2021/mar/11/la-ports-stalled-ships-stressed-crews-covid-buying-boom.

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Figure3:Freightrates($)

—WCIShanghaitoRotterdamper40footbox(USD)

—WCIShanghaitoLosAngeles

per40footbox(USD)

Source:Bloomberg.

2.2Pricevolatilityandshortages

Theincreaseinscarcityandhighercostsofgoodsproductionanddistributionweremanifestedinbothconsumerpricesandtheavailabilityofgoodstoconsumers.Aremarkableexampleofhowthese

phenomenamaterialisedwasinthemarketsfornewandusedcars.Anticipatinglowerdemandandthedi?cultyofprocuringparts,manymanufacturersdisinvestedtheirinventoriesandcancelledordersforinputssuchassemiconductors(Burkackyetal,2022).Butincontrasttoexpectations,consumerdemandforcarssurgedandcarcompaniescouldnotkeepupwithdemand,resultinginanapparent

‘shortage’ofchipsforcarmakers.Inthecaseofnewcars,thisledtolongwaitingperiodstoreceivenewcars,whilepricesremainedrelativelysimilar.Companiesdecidednottousemarketpricinginordertomanagetheirinventories,andinsteadoptedtoincreasewaitingperiodsforconsumers.Meanwhile,thesecond-handcarmarketdidnothaveanysuchrestrictions.Inthismarket,pricessurgeduntilmarkets

cleared.Figure4

showspriceindicesfornewandusedcars.Whiletherewasagradualincreaseinthepricesofnewcarsby19percent,pricesforusedcarssurgedrapidlyby57percent.

7

Figure4:UsedversusnewcarsCPI,UnitedStates

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Source:BruegelbasedonFRED.

Thispointstoaninterestingdynamic,withsomemarketsabletoreacttosupplyordemandshocks

throughpricing,whileothersareless?exible.Inmanycases,commoditypricessimplyincreased,

leadingtopricevolatilitybutnotshortages.However,whentherearepre-negotiatedpricesincontractsorreputationalrisksassociatedwithmassivepriceincreases(asisthecaseforcarmanufacturers),anincreaseinscarcitycanleadtoactualshortagesandlongerwaittimesfortheful?lmentofcontracts.

2.3Policyresponsesandtheaftermath

Pandemic-inducedpoliciesplayedamajorroleincreatingthemarketdistortionsexperiencedduringthepandemic.Closedbordercrossings,factoryclosuresand?scalstimulusplayedimportantrolesintheeconomicimpactofthepandemic,andtheimpactonsupplychainsspeci?cally.Therewasalsoanincreaseinexportrestrictions,inparticularformedicalgoods(Evenett,2022).Atthesametime,thereweree?ectivepolicyinterventionstomitigatethee?ectsofthepandemiconconsumersand

producers.Afterthebriefimplementationofaninternalexportrestriction,EuropeanUnion

policymakersshiftedquicklytocommonpolicieswhenitcametopandemic-relatedtrademeasures(Marcusetal,2021).IntheEU,‘greenlanes’wereestablishedthatenabledgoodsto?owacross

otherwiseclosedborders.

Whiletheshockwashuge,thepandemicisyettoleavealastingmarkintheglobaltradeindicators.

Tradeingoodsrevertedquicklytoitspre-pandemictrend,despitetheinitiallargedropinretailtradeandthepricespikesintheinternationalanddomesticcostsofshipping.Mostpandemic-inducedpricespikeshavecomedownandnormalised.In?ationhasnotreturnedtoitspre-pandemictrendineithertheEUortheUS,butthisispartlydrivenbythee?ectsofthewarinUkraine.

8

However,thepandemichasledtoarethinkingamongpolicymakers.IntheEU,thesinglemarket

emergencyinstrument(beingadoptedattimeofwritingastheInternalMarketEmergencyand

ResilienceAct,IMERA

7

)isintendedtoprovideasustainedlegalbasisforthetypeofmeasuresused

duringthepandemic.Itisintendedtomitigatetheimpactifanothershockofasimilarkindwereto

appear.Industrial-policyinitiativesliketheEuropeanChipsAct(Regulation(EU)2023/1781)are

directlymotivatedbytheshortagesexperiencedduringthepandemic,andtheperceivedrisksoflongvaluechainshaveincreased.Thepandemicexperiencehasalsocontributedtothenewwaveof

industrial-policyinitiatives,asgovernmentshavebecomemoreworriedaboutsupplychainsandtrytoreshoreproduction.LawsincludingtheIn?ationReductionActintheUSandtheEuropeanreactiontoit(undertheTemporaryCrisisandTransitionFramework,seeTagliapietraetal,2023)attempttolocalisemanufacturingofgoodsconsideredcritical,whichispartiallyjusti?edbytheneedforeconomic

resilience.Suchpolicyshiftsasaresultofthepandemicwilllikelyleadtoalastingchangeinglobalsupplychains,especiallygiventhefurtherimpetustosuchpoliciesstemmingfromRussia’sinvasionofUkraine.

3TheRussianinvasionofUkraine

Russia’sfull-scaleinvasionofUkrainestartingon24February2022cameduringaperiodofelevatedcommoditypricesandcausedrecordpricespikesincommoditymarketsforenergyandagriculturalgoods.However,theeconomicfallouthadunevene?ectsacrosscountries.Thosewithlarge

dependenciesonRussianorUkrainiancommoditiesandwithfewreadilyavailablesubstitutes

experiencedlargershocksthanthosewithmorediversi?edsupplychains.Thiswasparticularly

notableforinfrastructurallyconcentratedsupplychains,suchaspipelinegastotheEU.Theinvasionexposedthesemajorsupplychainrisksandhasbeeninstrumentalincausingashiftoftoneinthepolicydebatearoundtheriskstoglobalsupplychains,compoundingsimilarbutnascentrhetoric

duringthepandemic.Thisincludestrepidationaboutotherpotentialchokepointsinglobalsupplychains,tradediversi?cationandinfrastructuralinvestment,andageneral?urryofdiscourseandpolicyrelatedtotheideaofstrategicautonomy.

Inthissection,weexplorehowtheshockplayedoutinregionsthatwereexposedduetohigh-risk

supplychains.Wearguethattheinvasionwasalocalshock,sinceshockswerenotsointenseinareaswithmorediversi?edsupplychains.Wealsoanalysetheensuingpolicyresponse.

3.1Energyshock

Priortotheinvasion,EuropewasdependentonRussiaforasigni?cantproportionofitsenergyneeds.In2021,importsofRussiangasaccountedforalmost40percentoftheEU’stotalgasconsumption

8

.

7SeeCounciloftheEUpressreleaseof1February2024,‘SMEI/IMERA:CouncilandParliamentstrikeaprovisionaldealoncrisispreparedness’,

https://www.consilium.europa.eu/en/press/press-releases/2024/02/01/single-market-emergency-

instrument-council-and-parliament-strike-a-provisional-deal-on-crisis-preparedness/.

8SeeIEApressreleaseof3March2022,‘HowEuropecancutnaturalgasimportsfromRussiasigni?cantlywithinayear-

News’,InternationalEnergyAgency

,/news/how-europe-can-cut-natural-gas-imports-from-russia-

signi?cantly-within-a-year.

9

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AlmostalloftheEU’sgaswasdeliveredthroughonlyfourpipelinesfromRussia:NordStream,UkraineTransit,YamalandTurkstream(Zachmannetal,2024).Thisrepresentedasigni?cantstakeintheEU’senergyinfrastructure,whichprovedtobeanmajorsystemicrisk.

Priortotheinvasion,theEUwasalreadyexperiencinganenergycrisisinthesecondhalfof2021

becauseofincreasedgasdemandfollowingthere-openingofeconomiespost-COVID-19

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.TheRussianaggressionseverelycompoundedthecrisis,causingrecordenergyprices.Naturalgaspricesreachedhistorichighs

(Figure5)

inthesummerof2022becauseofthereductioninsupplyfromRussia,fearsofshortages,generaluncertaintyandlowoutputfromhydroandnuclearelectricityoutputinthe

summer(McWilliamsetal,2022;GilTertreetal,2023).ThisledtoincreasedwholesaleelectricitypricesintheEU,passedthroughtohouseholdsandindustry,sincethemostexpensivetechnologydeterminestheelectricityprice(McWilliamsetal,2022;GilTertreetal,2023).

Figure5:LastpriceTTFfutures(€/MWh)

Source:Bloomberg.

Incontrast,theUSsawlesspricevolatility(Figure6).LargeUSdomesticgasproductionandfewtiestoRussiaandUkrainegenerallymeantthattheUSwasinitiallyshieldedfromtheshock.TheHenryHubprice,theUSnaturalgasbenchmarkprice,eventuallyincreasedduetotheglobalgasmarkets,butnottothesamedegreeasinEurope.IntheabsenceofasystemicrisktotheUS’senergyinfrastructure,

thekindsofpoliciesthattheEUhaspursuedsincetheinvasionhavenotbeennecessaryintheUS.

9SeeCounciloftheEU,‘Energypricesandsecurityofsupply’,

https://www.consilium.europa.eu/en/policies/energy-prices-

and-security-of-supply/.

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Figure6:EuropeanvsUSnaturalgasprices(€/MWh)

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20/07/201820/07/2019

20/07/202020/07/202120/07/2022

TTFHenryHub

20/07/2023

Source:Bloomberg.

Thereweresubstantialpolicyreactionstothisshock,inparticularintheEU.Thisincluded?scal

supporttoaidconsumersandindustryfacingelevatedprices,aswellastradediversi?cationand

investmentinenergyinfrastructuretodiversifyfromRussianenergy.Manyofthesepolicieswereofenormousmagnitude,showcasingtheproportionateresponseneededtoashockinahighriskand

essentialsupplychain.IntheEU,theimmediateresponsewastoshieldhouseholdsandindustryfromthehighenergycosts.TotalenergysubsidiesintheEUincreasedfrom€216billionin2021to€390

billionin2022throughatleast230measurestoeasetheburdenofhighandvolatilepricesacross

economicsectors.Householdsandindustryreceivedthemajority

(Figure7)

(EuropeanCommission,2023).Subsidiesweredesignedtolowerthecostofenergytofacilitatedemandviataxmeasures,

incomeorpricesupportanddirecttransfers(EuropeanCommission,2023).Subsidieswerealsousedtocombattheenergycrisisthroughsupportingenergye?ciencyandsupportinginfrastructure,whichreceived250percentmoreinsubsidiesin2022thanin2021(EuropeanCommission,2023).

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Figure7:EnergysubsidiesbyeconomicsectorintheEU27,€billions(2022prices),2015–2022

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Others

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Households

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Source:EuropeanCommission(2023).

TheEUhasalsopursuedmedium-andlonger-termstrategiestoreducetherisktoenergysupplies.

Sgaravattietal(2022)groupedtheEU’smulti-prongedapproachtotheenergycrisisintoenergydeals,infrastructure,energysubstitution,demandreductionandthedevelopmentofrenewables.TheEU

succeededinreplacingRussiangassupplythroughnewdeals,whichbytheendof2022,hadresultedinagreementsamountingto10.8billioncubicmetres(bcm)ofnewgassupplyin2023and47bcm

lateron,notincludingthe50bcmLNGimportvolumeplansfromtheUS.

NewinfrastructureinvestmentincludedexpandedLNGcapacity,theBalticpipelinebetweenNorwayandPoland,gasinterconnectorsand?oatingstorageandregasi?cationunits.Also,interestin

alternativesupplychainsbypassingRussianterritoryhasincreased.TheEuropeanBankfor

ReconstructionandDevelopmentannounceda$100millioninvestmentintheKazakhrailwaysystemtosupportthemiddlecorridor,analternativerouteavoidingthetrans-Siberianrailwaytotransport

goodsfromChina(Eldem,2022).

Thecombinationofpoliciesdescribedabovehasbeenbroadlysuccessful.Whilstitistoosoontofullyevaluatethesuccessofenergysubsidiesincombatinghistoricallyelevatedenergyprices,therearesignsoftheircontributiontotheEU’sresilienceduringthecrisis.EvidencesuggeststhatsubsidiestohouseholdswerewelltargetedintheEU,shieldingthemost-vulnerableconsumersfromthepass

throughofelevatedenergycosts(seeArreguietal,2022).Furthermore,industryoverallincreasedoutputandemploymentin2022

(Figure8)

.Ontheotherhand,industriesforwhichenergyinput

representsalargerproportionofproductioncosts,suchasthechemicalsindustry,experienceda

contractioninoutputinthethirdquarterof2022relativetothethirdquarterof2021(Sgaravattietal,

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40%

2023).Finally,thedevelopmentofnewinfrastructuretoaccommodatenewsourcesofenergycontributedtolowergasprices,andhassecuredalow-riskanddiversi?edenergysupplyforthefuture.

Figure8:ChangeinEUindustrialoutput:Q32022vsQ32021

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0.0%

-2.0%

-4.0%

-6.0%

-8.0%

IndustrytotalManufacturingPaperChemicalsNon-metallicBasicmetals

minerals

OutputEmploymentHoursworked

Source:Sgaravattietal(2023).

TheEUexperiencedahugeshockrequiringanequallyhuge?scal,infrastructureandtraderesponse.

Thesepolicieswerelargelysuccessful,demonstratingtheEU’smulti-facetedresiliencetotheshock.Itshouldbeemphasisedthatthisresiliencecamewithalargepricetagthatitwouldbeundesirabletorepeat.

3.2Agriculture

AtthepointRussiainvadedUkraine,thetwocountries,alongwithKazakhstan,wereresponsiblefor25percentofglobalcerealexports,andRussiaandUkrainealonewereresponsiblefor12percentofallcaloriestraded(Zachmannetal,2022;Glauberetal,2022).RussiaandUkraineaccountedfor20

percentand10percentofglobalwheatexports,respectively,andarecrucialsuppliersofbarley,sun?oweroil,maizeandrapeseedtoglobalmarkets(OECDandFAO,2022).

Ukraineexported96percentofitsagriculturalproductsviatherobustnetworkofBlackSeaports

(USDA,2023).Russia’sinvasioninitiallyblockedallofUkraine’sportsforaperiodofalmostsixmonthsfromFebruarytoJuly2022.MajorportsincludingMykolayiv,MariupolandKhersonwereeither

a?ectedbythe?ghtingordestroyed(Zachmannetal,2022).

Likeenergyexports,agriculturalcommoditieswerealreadyatrelativelyhighpricesin2021andearly2022,asaresultofpass-throughofhighinputprices.Followingtheinvasion,globalfearsabout

Ukraine’sabilitytoharvestandexportagriculturalcommoditiescompoundedthesealreadyelevated

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Eurospertonne

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