CHINA-US TRADE CONFLICT COULD DETERMINE THE FUTURE OF GLOBAL VALUE CHAINS
Hannover, Germany – September 5, 2020: A rise in protectionism across the global economy, triggered by COVID-19, threatens to setback 30 years of globalisation and could result in disruptive changes to the structure of global value chains, according to speakers at the Virtual Edition of the Global Manufacturing and Industrialisation Summit, which is taking place from September 4-5.
A panel discussion on the subject of ‘Glocalisation: from global to local?’ brought together Nan Cunhui, Vice Chairman, CHINT Group, China, Dr. Nicholas Garrett, CEO, RCS Global, and Dr. Volker Treier, Chief Executive of Foreign Trade and Member of the Executive Board, Association of German Chambers of Industry and Commerce (DIHK), who exchanged views on the future of global value chains and trade patterns on the second day of the #GMIS2020 Virtual Summit.
Nan Cunhui, Vice Chairman, CHINT Group, China said the short-term impact of COVID-19 on global supply chains was merely to reduce the scale of production and delay delivery of orders. However, in the longer term, it could result in deeper changes in the structure and the relationships of supply chains.
“The most important factors affecting the future direction of global supply chains would still be the factor costs of countries and the way China-US trade frictions are heading,” Nan said. “Over the past few decades, due to the rapid growth of China’s manufacturing sector, the global supply chain has shown a strong tendency of concentration. In the future, as China’s factor costs rise, security would be an increasingly big concern that will drive the global supply chain system toward diversification and decentralisation.”
On the subject of recent tensions in the trade relationship between China and the US, Nan said he believed cooperation and the attraction of a “win-win” situation would ultimately prevail. He said: “Chinese enterprises and the Chinese government have always promoted this kind of philosophy, and we believe that this will win the support of most people in the West, including the government of the United States, and its business community. People who wish for economic development and social stability will support this kind of a philosophy.”
Dr. Volker Treier raised concerns over the rise of protectionism and nationalism in global trade in recent years, which appears to have been exacerbated by the pandemic.
“Right now, we have a setback in globalisation, a setback in investment, which is especially affecting the trading of goods,” he said. “We have to take into account that there is a certain trend towards nationalist behaviour to protect very high-value goods like medical equipment and vaccines to dampen the effects of the virus. Globally there is a greater threat that crucial imported goods cannot enter countries because these trade barriers are being built up even stronger than before the pandemic.”
Treier said Germany had taken similar actions at the beginning of the crisis, restricting exports of crucial goods, especially those related to healthcare, however it had since reconsidered this approach. “We did have export restrictions, but this provokes or could provoke other countries to introduce tit-for-tat measures. So, we eliminated this because we do understand that this is not the way a country like Germany should behave.”
Another factor influencing global value chains is growing customer consciousness of ethical production, especially in the west, over the origins of the products they buy and how they have been produced. He said: “We have an intense debate here in Germany about responsibility in the global supply chains of German producers, whether there are violations in human rights in the supply chains and how to prevent this. This ongoing debate also shapes localisation and influences choices on where to produce, where to source, and where to relocate.”
Dr. Nicholas Garrett said technologies such as blockchain are being used to build stronger supply chains that offer traceability to demonstrate the origin of a product, and credible sustainability assurance data.
“These are full value chain wide systems connecting companies that are linked through trade, through a technology platform, and this ultimately enables companies to reduce risk, to add significant value to their products. Ultimately, this yields major market advantages, risk management and efficiency advantages.”
Garrett said China needs to catch up on sustainability, and this is a key area where they are not performing as well as European producers. “Once China can merge its highly efficient production capacities with demonstrable and believable sustainability credentials, it will be an even bigger force to be reckoned with,” he said.
Despite the world experiencing “an exceptional phase of politicisation” of the business world, with national government interference, particularly amongst certain superpowers, Garrett said digital systems are making the world more connected, and end users and suppliers are working more closely together, irrespective of where they’re based. “I think that makes me very hopeful that we’re not seeing the end of globalisation, but simply a coming closer together,” he said.
Caroline Freund, Global Director, Finance, Competitiveness and Innovation, World Bank Group, delivered a keynote on the Past, Present, and Future of Global Value Chains. She advocated promoting a more resilient recovery by reducing barriers to business and investment to keep finance flowing, preserve jobs, and build a more sustainable economy. Adoption of technology, she said, is a silver lining of this crisis, because firms are adopting more digital processes and finding productivity gains which they are likely to persist with.
She added: “There is also more of a realisation of the dangers of climate change and a focus on the sustainability agenda. This kind of Black Swan event has taught us that these things happen and firms will be more cognizant of things they can do to reduce environmental impact and focus on conservation. And finally, there’s a real need for more global cooperation. We may not see a lot of that right now, but that is the way to solve a pandemic.”
Speaking on behalf of H. E. Abdel Fattah Al-Sisi, President of Egypt, H. E. Nevein Gamea, Minister of Trade and Industry, Egypt, delivered a keynote on Global Value Chains and Egypt’s Role in Africa, in which she reaffirmed Egypt’s commitment to building a competitive, balanced and diversified economy based on innovation and knowledge, and supported by economic reforms adopted by the Egyptian government. She emphasised Egypt’s belief in regional and international cooperation and the importance of strengthening joint industrial integration frameworks, in cooperation with development partners, in a way that contributes regionally to achieving sustainable development goals.
The Global Manufacturing and Industrialisation Summit is a joint initiative by the United Arab Emirates and the United Nations Industrial Development Organization (UNIDO). Under the theme – Glocalisation: Towards Sustainable and Inclusive Global Value Chains, the third edition of the Global Manufacturing and Industrialisation Summit (#GMIS2020) has gathered a cross-section of close to 100 global leaders from the world’s public and private sector to participate across more than 20 virtual sessions to discuss pathways to accelerate the role of fourth industrial revolution (4IR) technologies to build more resilient global value chains and restore prosperity in a post-pandemic world.
Note to Editors
The Global Manufacturing and Industrialisation Summit (GMIS) was established in 2015 to build bridges between manufacturers, governments and NGOs, technologists, and investors in harnessing the Fourth Industrial Revolution’s (4IR) transformation of manufacturing to enable the regeneration of the global economy. A joint initiative by the United Arab Emirates and the United Nations Industrial Development Organization (UNIDO), GMIS is a global platform that presents stakeholders with an opportunity to shape the future of the manufacturing sector and contribute towards global good by advancing some of the United Nations Sustainable Development Goals.
The first two editions of the Global Manufacturing and Industrialisation Summit were held in Abu Dhabi, United Arab Emirates in March 2017, and Yekaterinburg, Russia in July 2019, respectively, with each edition welcoming over 3,000 high-level delegates from over 40 countries.
GMIS 2020, the third edition of the Global Manufacturing and Industrialisation Summit, will be held virtually as a sequence of digital series starting June 2020 followed by a virtual Summit in September 2020, and will focus on glocalisation.
To learn more about GMIS, please visit https://gmisummit.com/ and follow GMIS on Twitter: @GMISummit, Instagram: @gmisummit, LinkedIn: GMIS – Global Manufacturing & Industrialisation Summit, and Facebook: @GMISummit.
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