Firms in Global Value Chains during Covid-19

Using detailed monthly firm-level trade data from Indonesia from February 2019 to June 2021, this paper shows that firm-level exports were overall more resilient than imports during Covid-19. Firms that participated in global value chains were more resilient to the Covid-19 shock beyond the immediate short-run compared to firms that did not. However, among global value chain firms, those that faced certain types of non-tariff measures on their import products, notably port of entry restrictions, on average faced larger reductions in export quantities and number of transactions compared to firms that did not face such restrictions, consistent with the evidence of major port congestion during Covid-19. Therefore, although international connectedness could be a source of vulnerability to global shocks in the immediate short run, policies that enable firms to be more globally engaged through global value chains could enhance resilience. Relatedly, tackling measures such as port of entry restrictions can ensure fast and efficient port and customs procedures, especially during periods of high port congestion, as global value chain trade requires goods to cross borders many times