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Costanza Bosone

21 March 2024
Economic Bulletin Issue 2, 2024
Rising trade tensions and a spate of policies aiming to bring national security concerns to bear in trade relations have sparked growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant. This box addresses the issue using a structural gravity model augmented with a geopolitical distance measure based on UN General Assembly voting to investigate the role played by geopolitical factors for trade in manufacturing goods over the period 2012-22. It provides evidence that the degree of geopolitical alignment is playing an increasing role in determining bilateral trade flows. The impact of geopolitical distance on trade is heterogeneous: in particular, geopolitical considerations mostly affect European trade in strategic products.
JEL Code
F10 : International Economics→Trade→General
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration