COVID-19 Not Globalization Crisis: Financial Times

Global and community leaders most understand the nature of the COVID-19 crisis to develop effective strategies. The crisis calls for global cooperation rather than competition. People may pursue fewer person-to-person connections, but will still rely on global communications and data on best practices. “The virus has revealed the hidden costs and fragility of global supply chains, triggering a ‘backlash’ to globalization,” explains Robert Armstrong for Financial Times. “But companies still see the advantages of global trade, consumers still benefit from it, and it still makes the world a safer place.” Armstrong suggests that companies go beyond priortizing costs and consider security and a range of risks with diverse and multiple regional supply chains. Armstrong describes how the Fukushima nuclear crisis highlighted the value of a range of specialization around the world for microchip production. While sourcing close to demand is reasonable, diversity in supply chains is useful because a crisis can emerge in any location. “Globalisation binds our fortunes together,” Armstrong concludes. “That these bonds makes us collectively richer is clear, given that the countries which have embraced global trade, along with education and investment, are the most prosperous.” – YaleGlobal

COVID-19 Not Globalization Crisis: Financial Times

Coronavirus is a global crisis, not one of globalization – the distinction matters, or leaders will draw wrong lessons
Robert Armstrong
Wednesday, March 18, 2020

Read the essay from the Financial Times that analyzes the COVID-19 crisis.

Robert Armstrong is the FT’s chief editorial writer.

 -	Goods-producing value chains are less trade intensive -	Services play a growing role -	Trade based on labor-cost arbitrage is declining  -	Value chains are more knowledge-intensive	 -	Value chains are more regional and less global   Global demand is shifting away from advanced economies -	Emerging markets could consume about two-thirds of world’s manufactured goods by 2025  Rise of domestic supply chains in emerging economies decreases global trade intensity  -	Emerging Asia is less reliant on imported inputs for production of goods New technologies have reduced communication and transaction costs -	Logistics will continue to improve -	Automation trends will continue and determine production sites Companies and governments must constantly reevaluate strategies -	Reassess where to compete and where value moves -	Consider how to capture value from services -	Consider how operations can withstand new risks -	Prioritize speed and proximity to customers, but consider other factors -	Be flexible and resilient  -	Build close, trusting supplier relationships

Prescient: “Today companies face a more complex set of unknowns as the postwar world order that held for decades seems to be giving way.”  Read the report from the McKinsey Global Institute on “Globalization in transition: The future of trade and value chains.”

Copyright The Financial Times Limited 2020. All rights reserved.

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