TY  - RPRT
        AU  - Maurer, Stephan Ernst
AU  - Milsom, Luke Heath
AU  - Rauch, Ferdinand
        TI  - The Fragility of the Global Trading System
        PY  - 2026/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18693
        UR  - https://www.iza.org/publications/dp18693
        AB  - We use a parsimonious gravity framework to simulate and compare five potential shocks to the global shipping system: closures of the Panama Canal, the Suez Canal, and the Strait of Malacca, and openings of the Northwest Passage and a hypothetical Kra Canal. Applying a single, consistent methodology across all five scenarios allows relative comparisons. Using carefully measured seaborne distances between ports under each hypothetical geography, we find that a Panama closure would be the most consequential shock, reducing global trade by nearly 3% compared to a default gravity prediction, followed by Suez (2.5%), Malacca, (1.7%), a Kra opening (+0.7%), and the Northwest Passage (+0.6%). Aggregate GDP and welfare effects are more muted, but show sizable heterogeneity across countries. For example, Panama loses over 9% of GDP from a Panama closure, Egypt and Sudan over 5% from Suez, and Malaysia over 4% from Malacca.
        KW  - gravity
KW  - Panama
KW  - Suez
KW  - Kra
KW  - Malacca
KW  - Northwest Passage
        ER  -