Informal Networks and Crisis Resilience

ABSTRACT Do informal networks provide resilience to trade in times of crises and rising trade policy uncertainty? We address this question by examining the effects of Commonwealth and Francophonie membership, two prominent examples of informal networks, on cross‐border trade in goods in a structural gravity framework over 2000–2019. Our results show that Commonwealth and Francophonie members trade more within these networks during episodes of global trade uncertainty, a finding not observed for participants of formal trade agreements. The ‘safe‐haven’ effect of informal networks is concentrated at the intensive margin; found to be salient for low‐income countries; but not observed for high‐quality exports, high‐institutional quality countries, and non‐relational goods like agricultural products. This suggests that shared cultural, linguistic, and legal norms in informal networks substitute formal institutional mechanisms and facilitate relational contracting during crises that enable trade resilience. Our findings are especially relevant for LDCs, impacted by US ‘reciprocal’ tariffs and their induced trade policy uncertainty.