Global supply chains will adopt a hybrid of global and regional models once the Covid-19 pandemic is contained, Troy Stangarone, a senior director and fellow of the Korea Economic Institute of America (KEI), concluded during a Zoom conference with members of the Southeast U.S. Korean Chamber of Commerce June 19.
Mr. Stangarone was sensitive to the recognition by countries around the world of the importance of national security in the face of the pandemic. But he discounted that Covid-19 would fragment already established networks entirely.
Instead he foresaw a realignment of distribution patterns in view of the failed delivery of certain supplies such as personal protective equipment and even food that the pandemic dramatized
He predicted “better use” of stockpiles and their upkeep to guard against the breakdowns resulting from the spread of Covid-19. Governments would recognize the need for stockpiles to provide essential goods quickly and locally, he said.
He also foresaw greater reliance on technology including 3D printing capabilities to replace goods in demand as well as artificial intelligence software to manage the distribution of needed resources should another pandemic emerge.
“There is a lot of uncertainly where things are going,” he said. Although the pandemic will create “a different world” once a vaccine is discovered and economic activity is restored, he discounted the “Balkanization” of the global economy into separate geographic sectors. Instead he concluded “a hybrid between globalization and regionalization” would evolve.
Changes in the world’s supply chains were underway even before the outbreak of the pandemic, which, he said, accelerated existing trends. Already global trade and foreign direct investments globally were slowing down.
As examples of trends taking place before the pandemic, he referred to the reshaping of trade agreements such as the Trans-Pacific Partnership morphing into the Comprehensive and Progressive Agreement or the North American Free Trade Agreement’s modification into United States-Mexico-Canada Agreement.
Disruptions to trade also were exacerbated by nationalistic economic policies, and the trade war between the U.S. and China already was underway.
The United States and Japan were encouraging companies to bring their overseas operations back home offering a variety of tax incentives and subsidies.
In certain cases, the pandemic exacerbated the justification for this trend. For instance, he cited the shock to South Korea’s automobile industry when it experienced a rupture in the delivery of Chinese made airbags.
On the other hand, the reasons for the establishment of overseas networks originally would remain in place as well as the difficulty of reestablishing the supply chains even at home. Aside from cost factors, the time it takes to train local personnel and develop the expertise would remain an inhibiting factor, he said.
“There is a reason why and how these things developed,” he added.
KEI is a Washington-based think tank and public outreach organization dedicated to helping Americans understand the the full extent and importance of U.S. relations with the Republic of Korea.
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