WEF Davos: A resilient supply chain does not need to mirror the one in 2019, but build something better

The last two years of the pandemic have led to the great supply chain disruption in the world. From a shortage of semiconductor chips to the unavailability of containers, the trade and supply chain network has been in constant chaos. The need of the hour is not to go back to pre-pandemic times, but to build a stronger, resilient supply chain network.

Pat Gelsinger, CEO, Intel emphasises on the importance of diversification and believes that the company’s facilities should be global. “We believe that from all of our factories that we have around the world, along with two more sites that we’ll be announcing, they should supply to the world. They will also benefit by having a local presence and we believe that those benefits clearly can be satisfying local markets as well as global markets. That’s why we want a globally distributed, resilient supply chain where no market is uniquely dependent on any other supply, or any singular location,” he said. Gelsinger was speaking at a panel at the World Economic Forum’s Davos Agenda 2022 titled ‘Restoring Trust in Global Trade and Supply Chain’.

At the same time, he added that in the future, there’s also the need to do stress tests on supply chains and look at supply chain implications as it will help bring more transparency to the system.

Agreeing with Gelsinger, Ngozi Okonjo-Iweala, Director General, World Trade Organization (WTO) said that this diversification is a chance for us to integrate those countries and parts of the world that have been left behind not included in the benefits of globalization.

“So, relocating or diversifying your manufacturing sites, to other countries in the developing world, as you seem to be doing that, is a good thing. We see shifts to Vietnam, Laos, Cambodia, Bangladesh, Ethiopia and so on in our data, and I call it a way of re- globalising, and using this globalisation and supply chain to solve some of the inequality and lack of inclusion problems,” she said.

Okonjo-Iweala adds that in order to make supply chains work, it is important to look at what is happening to the rules-based trading system, which is often taken for granted.

“If you have people who are putting in export restrictions and prohibitions, even one of those will prevent some inputs from moving from one part of the world to the other where they are needed, and that will disrupt supply chains. So, we also need to pay attention to how the multilateral rules-based trading system is functioning. And yes, I think the monitoring function that we have, the transparency function we have, with our members is crucial to making supply chains work,” she said.

Adding to this, Katherine Tai, United States Trade Representative, said that as we devise a resilient supply chain, it is important to make sure it allows a high standard of living for everyone and not just generate wealth.

“The system needs to provide sustainability for our people and for our planet… We have to lead in terms of transforming the purpose and the effectiveness of trade in our global economy and that it isn’t just to generate wealth and income it is actually to improve the lives of people,” she said.

Among other efforts to build a resilient supply chain, Sultan Ahmed bin Sulayem, Chief Executive Officer of DP World talked about the need to adopt technology and digital solutions. He mentioned how non-technical solutions and bureaucratic issues can often cause delays in trade, including for products like temperature sensitive vaccines during the pandemic.

Agreeing with him, Okonjo-Iwealea said that WTO has a trade facilitation agreement that is trying to move countries to remove the red tape issues to digitize customs procedures to modernize it. USTR’s Tai highlighted that for the last almost two years, we have been yearning for a return to normalcy, but we don’t have to look at that.

“I think that it is time for us to acknowledge that our goal really shouldn’t be to try to go back to the way the world was, in 2019 but to take lessons, very hard-earned lessons, very painful lessons that we have experienced over the past two years and take this opportunity to build towards something that is different and better,” she said.

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