RFQ: The Potential Implications of Global Economic Fragmentation for the Food and Energy Trade of Small Island Developing States (SIDS)

Background to the assignment

The Commonwealth Secretariat and the World Trade Organization (WTO) are undertaking a joint project to assess the implications of potential Global Economic Fragmentation on Small Island Developing States (SIDS). As part of this project, the two organisations wish to procure the services of a consultant to undertake empirical analysis for the report, especially in relation to maritime, food and energy trade of SIDS.

The recent disruptions to global supply chains caused by the COVID-19 pandemic, the conflict in Ukraine and broader geopolitical conflicts have compelled several governments and firms to reconsider their external trade dependencies to develop more resilient and sustainable supply chains. Many large economies are exploring alternative strategies of ‘nearshoring’, ‘reshoring’ (bringing manufacturing back to the home country) and ‘friendshoring’ (moving manufacturing to trusted allies). These sourcing strategies are fuelling potential Global Economic Fragmentation (GEF) whereby the world economy splits into two or three distinct trading blocs, with additional splintering expected along technology and payment systems. 

This GEF could lead to the re-orientation of global maritime trade and shipping routes, with potentially adverse effects on the trade flows of the world’s 39 SIDS. These countries remain highly dependent on shipping for their food and energy supplies. These two commodities constitute a quarter of their merchandise imports and exports, on average, but for some countries this share could be as high as 90 per cent. SIDS’ large dependence on global markets for these essential supplies makes them highly vulnerable to external shocks. These economies have very high trade costs as they are located in remote parts of the world, with very low shipping frequency and small production bases. Any re-orientation of shipping routes because of GEF could have severe implications for the food and energy security in these countries.

This study will examine the impact of potential GEF on the food and energy trade of SIDS. It will explore the knock-on effects of these disruptions on trade flows, economic growth and prices for consumers.

Monitoring/Reporting requirements

The consultant will work with the Commonwealth Secretariat and the WTO to undertake the following tasks:

1. Review the literature on the impacts of potential GEF and summarise key findings and methodologies used in these studies.
2. Develop a short conceptual framework and identify potential transmission mechanisms by which GEF might affect the food and energy trade in SIDS.
3. Compute and plot the trade-weighted distances that broader categories of food and their inputs and energy commodities (petroleum, gas) travel to reach each of the 39 SIDS and aggregate this for three regional groups (Nicita, 2023): the Caribbean;the Pacific; and the African, Indian Ocean, Mediterranean and South China Sea (AIS/AIMS).
4. Estimate SIDS’s trade at risk in these commodities and plot charts for the above three regions, highlighting the most affected countries and regions (IMF, 2023); compute and plot average Liner Shipping Connectivity Index (LSCI) and trade costs for SIDS.
5. Calibrate Computable General Equilibrium (CGE) model for current energy and food trade shipments for SIDS; examine the impacts GEF shocks (changes in trade costs, longer shipping routes, hike in tariffs (Javorcik et al., 2022)) could have on aggregate and sectoral (food and energy) trade flows (volume, value and composition of exports and imports), food and energy prices for consumers, GDP and growth rate.
6. Aggregate these modelling results by the three regions and highlight the most vulnerable members. Use the same CGE model to explore economic effects of additional but associated shocks (technological fragmentation and payment systems decoupling) on SIDS’ food and energy trade flows (ICC, 2023).
7. Replicate the estimates in ‘v’ above for the 56 Commonwealth countries and aggregate the results by Commonwealth regions and development levels.

Skills and experience required:

Post-graduate degree in Economics with at least 15 years of experience in Computable General Equilibrium (CGE) analysis demonstrated through high quality or peer reviewed publications.

The preferred consultant will have some knowledge and understanding of the unique trade challenges and vulnerabilities of SIDS, especially the impact of external shocks like the conflict in Ukraine, the COVID-19 pandemic and potential GEF.

Knowledge & Skills required:

1. Solid understanding and knowledge of international trade flows and challenges of food and energy security faced by SIDS.
2. Strong research design and report writing skills, including capacity to prepare accurate, relevant, reliable and analytical legal and policy reports.
3. Strong technical drafting and editing skills with attention to detail.
4. Ability to work under pressure while keeping to timelines.
5. Ability to work with a high degree of accuracy and attention to detail on complex assignments.
6. Sound organisational and planning skills, including proven ability of meeting strict deadlines.
7. Reasonable flexibility to adapt to limited changes in the terms of reference.
8. Strong interpersonal and communication skills and ability to work constructively with internal and external stakeholders

Please apply for this contract by submitting a Technical and Commercial proposals to [email protected] by 14 September 2023.

Prices quoted should include VAT but must indicate clearly where VAT is applicable and where items might be zero-rated.

Evaluation will be based on 100% quality.