Pandemic and the Future of Trade

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The outbreak of coronavirus disease (COVID-19) has created a global, disruptive, long-lasting, and unprecedented public health crisis. However, the impact of the pandemic has moved beyond health and generated economic uncertainty and political instability. Specifically, many observers expressed concern that the pandemic will stir up protectionist sentiments in many countries and affect the public’s trade preferences worldwide. Public trade preferences are about the public’s preferences for the economic openness of a country and whether the country should be expansive on doing more trades and businesses with other countries. Yet, the impact of the pandemic on public trade preferences is unexplored and thus requires systematic empirical study to fill the gap.

Dr Nick OR and Dr Edmund CHENG of CityU’s Department of Public Policy examined the pandemic impact on international trade in their recent article by assessing public attitudes toward trade in Asia during the early outbreak of the pandemic. They conducted original cross-national surveys in six key and highly integrated economies in Asia – Hong Kong, Japan, Singapore, South Korea, Taiwan, and Thailand – in May 2020. The study found that most people support establishing closer trade relationships with foreign countries. Surprisingly, most people prefer to buy more domestic products than foreign products. The incongruent view is observed in all six economies, but what explains this?

The study analysed the influences of pandemic-related risk perceptions, anxiety, ethnocentrism (that is, how racial or ethnic in-group evaluate out-group), and socio-economic status to provide a more nuanced understanding of the incongruent view. 

The study shows that pandemic-related risk perceptions are the key psychological drivers for the incongruent opinions on those two trade preferences. It found that the cognitive evaluation of the pandemic – when the pandemic ends – stimulated more protectionist attitudes in support of trade but has no effect on foreign product preference. The affective appraisal process – one’s worries on job and health – gives an even more pronounced difference. A higher level of affective risk perception stimulated more support for trade but attenuated the preference for buying foreign products. Anxiety, however, does not contribute to the incongruence.

Overall, the study offered a nuanced framework to understand the relationship between psychological factors and public trade preferences. The framework improves the understanding of how the current pandemic affects the future of international trade and contributes to the ongoing and burgeoning research in international political economy and economic globalisation.