The world's largest exporters are the hidden culprits behind significant fluctuations in international trade, according to research from the University of Surrey, in collaboration with the Bank of France. 

Their study, published in the Journal of International Economics, shows that when these corporate giants falter, it sends shockwaves through the global economy, resulting in catastrophic declines in exports during crises such as the 2008 financial meltdown and the Covid-19 pandemic.

Using data covering firm-level exports and imports from France between 1993 and 2020, the team analysed the monthly performance of thousands of exporters. The research revealed four critical insights:

• Variations in the export performance of large firms account for a staggering 40% of aggregate export fluctuations

• These firms are particularly sensitive to macroeconomic shocks

• During major crises, the top 1% of exporters experience an overwhelming impact on their export volumes

• Their sensitivity is primarily linked to how they respond to large demand shocks, not just their involvement in global supply chains.

Lead author of the study, Juan Carluccio, Professor in International Trade at the University of Surrey, said:

"Our findings highlight the disproportionate influence of large exporters on overall trade dynamics. We commonly think as large firms as being more resilient and bringing stability to the economy. But our data shows the opposite: very large firms are actually more sensitive to global shocks, and they are actually a source of volatility.  Understanding their reactions to economic shocks can help policymakers formulate better strategies to mitigate the effects of future crises."

The research broke down aggregate export growth into two components: the average growth rate of all exporters and a "granular residual" that captures the impact of larger firms. By focusing on the largest exporters, the researchers were able to demonstrate that these firms react unfavourably to macroeconomic changes, with repercussions that re felt throughout the economy, leading to a significant decline in overall trade volumes.

Professor Carluccio continued:

“Our study sheds light on the crucial role that large exporters play in shaping the global trade landscape. As economies navigate the ongoing challenges posed by global crises, it becomes vital to recognise that support for these major players can lead to a more stable trade environment. Policymakers are urged to consider strategies that bolster the resilience of large exporters, ensuring they can weather economic storms without jeopardising global trade.”

“In an era where international trade is more volatile than ever, our research underscores the importance of focusing on the performance of large firms to help stabilise the global economy. By supporting the very firms that drive our economy, we can create a more resilient trade ecosystem that benefits everyone."

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