WEF: Should trade continue to be global after the pandemic?
The advantages China offers will not become available closer to home and the costs of reshoring are high and often prohibitive.
Opportunities for global trade will be a key area for business growth after the pandemic.
Technology is pivotal to solving the lack of transparency in global supply chains.
Ten months in, the pandemic still poses a threat to lives and livelihoods in many parts of the world. Among its many impacts are the cracks in our international supply chains, which are crucial to keeping globalized economies ticking along.
In some instances, concerns about the risk of transmission have reignited calls for more protectionist, inward-looking economies. However, if one believes, as we do, that economic prosperity lies in facilitating the movement of goods and services from where they are produced to where they are most needed, then we would also urge that this can only be achieved through collective action, not isolation.
Continued globalization, with a focus on equitable distribution, and sustainable free trade are crucially important enablers on the road to collective recovery.
What have we learnt from the pandemic? With the usually reliable cadence of global supply chains being interrupted, reshoring – bringing manufacturing back from overseas – has surfaced as a popular solution. This has been exacerbated by pandemic-led closing of borders, at times cutting off essential supplies for many countries.
Shorter supply chains should reduce the risk of being cut off from key suppliers. But is it really efficient for companies to shift entire supply chains to make them closer to home, ignoring the advantages afforded by clusters of specializations in advanced manufacturing, or the lower costs of manufacturing afforded by emerging and frontier economies?
China’s Greater Bay Area, for instance, is a manufacturing hub for international companies. When we surveyed manufacturers there earlier this year, almost 70% were considering moving operations to other locations, but digging deeper we found that almost half of these respondents had not finalized their decisions yet.
In our view, China will still be pivotal in the global trade ecosystem and key to global supply chains, despite shifts. The advantages it offers will not suddenly become available closer to home and the costs of reshoring are high and often prohibitive.
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