GTIPA Perspectives: Global Value Chains After the COVID-19 Crisis

Integrated regional supply chains or new technologies that reduce cost advantages of global production can lead to a market-based re-organization of supply chains. The COVID-19 crisis also raised the issue of security of supply, as restrictions on international supply chains may have contributed to the economic downturn during the crisis.

Diversification of supply, reshoring, and stockpiling are relevant objectives, for which companies may be willing to pay a price. measures. Governmental provision of supply in the event of a global crisis may also be considered for very specific products—such as crude oil reserves. However, political intervention to force or to deeply subsidize reshoring has the potential to significantly reduce the wealth-creating effect of the global division of labor. Leveraging global value chains can often balance supply risks and help reduce costs. Security of supply should be managed by considering a range of options and costs at the company level. If global supply chains are utilized effectively, they can provide both wealth through the division of labor, competition, and a high level of security at the same time