In the second quarter of 2020, BCI decreased by 53.0 index points reaching an all-time low of -27.2 points. Business confidence deteriorated significantly across all sectors. The largest decline was observed in retail trade, followed by the service industry. The decrease in BCI was driven by worsened past performance as well as drastically pessimistic future expectations.
We live in a world where the production of a single good typically involves manufacturing inputs from many different countries around the globe. For example, a typical iPhone production takes place in as many as 7 countries, including the USA, Mongolia, Japan, Korea, Taiwan, China, and even Switzerland. This is what is known to economists as global value chains (GVC). The emergence of GVC more than two decades ago transformed the way economists think about countries’ comparative advantage and specialization in production.
Since the Uruguay Round of the World Trade Organization (WTO), which introduced agriculture to the GATT (General Agreement on Tariffs and Trade) negotiation table, there has been increasing policy interest and academic debate on food safety regulations and their effect on the agri-food trade. During the Uruguay Round, WTO members negotiated the Sanitary and Phytosanitary Standards (SPSs) in the “SPS Agreement” and the Technical Barriers to Trade (TBT) agreements, which share common principles and rules with all member countries (Mayeda, 2004).
The emergence of GVC, global value chains, around more than two decades ago transformed the way economists think about countries’ comparative advantage and specialization in production. It has also transformed the understanding of what it takes for a country to be successfully integrated into world trade networks and derive maximum benefit from global trade.
BCI in the fourth quarter of 2019 has increased to 18.5 index points, which is 10.2 index points above the previous quarter. The largest increase in BCI was observed in retail trade, followed by the construction industry. In these sectors, the increase in BCI is driven by both increases in past performance and in raised expectations. On the contrary, agriculture is the one industry where BCI decreased.