International trade resilience with applied welfare economics: an analysis on personal protective equipment

Abstract

A global crisis such as a pandemic causes a decrease in the global trade of medical supplies. One of the most significant issues healthcare workers and people face is the shortage of personal protective equipment (PPE) items. This study constructs the first international trade model to link infectious disease dynamics and global trade networks, considering the important relationship between government preparedness, domestic manufacturers, and consumers. We examine social welfare measures here in the presence of quantity controls and taxes on the global trade flows. An equilibrium coverage among countries is investigated that integrates net government revenue, purchasing cost, transportation cost, and the health cost caused by the shortage of PPE supply. We develop an optimisation model that balances domestic firms and the global trade network to satisfy the total demand for each traded PPE product. The proportional change in value-added on domestic production is also studied by considering the marginal manufacturing costs of a face mask. The results obtained from testing our model show that the average quantity coverage by the global trade networks among four countries decreased by up to using the proposed trade policy. Hence, a large amount of demand is met by relying on domestic production.