The latest WTO forecasts show global trade in decline - greater than the 2008 crisis. This crisis has highlighted the fragility of the ‘over-reliance’ on country and consumer dependencies on the ‘just in time’ supply chain. As governments turn their attention to protecting their future supply chains, they must also be careful not to exercise too much protectionism. This can ultimately end up in trade wars and less developed countries will suffer more.
International trade will be an important part of the global recovery and while changes are inevitable, it should not be at the expense of the benefits that come with it, including innovation.
If you look carefully at the chain, the core problem stems from a country’s over-reliance on the ‘just in time’ equation. The fashion industry is a classic example of this. Clothes manufactured in low-wage countries could be exported straight into stores, with little need for warehouses. The same happened with medical supplies, which is why many countries had little stock in reserve when the pandemic hit. This caused the health services significant issues.
To solve for this, the global supply chain needs to be refined and not disrupted. Diversification of source countries must be carefully balanced with new ‘on-shoring’ in home countries, but not forced ‘on-shoring’. Public and private need to work together and the storage issues must be addressed.