With so much talk about the end of globalization and rising tariff and trade barriers, it’s not surprising that some are even predicting the demise of global supply chains. Global supply chains are not disappearing. In fact, there are plenty of signs of greater cooperation starting to emerge. For this week’s shout-outs, we are highlighting new and emerging agreements that are helping build greater supply chain resiliency and foster international cooperation.
Within the United States, seven states (Connecticut, Delaware, Massachusetts, New Jersey, New York, Pennsylvania, and Rhode Island) in the northeast have formed a regional supply chain focused on facilitating access to medical equipment and coordinating economic reopening. In the northwest, California, Washington, and Oregon are similarly discussing supply chain coordination for medical materials, and have been joined by Colorado and Nevada, creating the Western States Pact.
These collaborative pacts in the United States are a microcosm of the cooperation occurring at the global level in the realm of ‘travel bubbles’. Just as lockdowns blocked the flow of goods and services across borders, these travel bubbles lift many of these restrictions. In the Baltics, Latvia, Lithuania, and Estonia lifted travel restrictions in mid-May. New Zealand and Australia similarly agreed on a trans-Tasman travel bubble between those two countries, setting the foundation for greater trade and a joint manufacturing strategy. Several Asian countries are currently exploring ways to join the trans-Tasman bubble or create their own as a key means to economic reopening. And the U.K. just announced plans to create a technology hub of suppliers among ten democracies to create alternative choices for 5G and other emerging technologies to foster greater supply chain resiliency and security.
Of course, these bubbles largely focus on the tourism industry and come with concerns of exclusionary restrictions. However, in the past global supply chains brought tourism; the causal arrow may be flipped now given the unprecedented impact of COVID-19. The movement of people could be the first step toward the greater movement of goods and help trade rebound and revitalize supply chains. For example, with the grounding of air lines due to lockdowns, air freight capacity was significantly diminished. Collaboration among localized logistics networks within these bubbles may be a stepping stone to greater global integration, as many airlines in Asia are already seeing much greater activity. In the retail industry, a shift to nearshoring and greater collaboration has been noted as a core first step to reviving the industry.
In short, while there is reason to be wary of rising economic nationalism, commercial collaboration and integration are re-emerging after months of disruption. Like Mark Twain, reports of the death of globalization have been greatly exaggerated. However, our supply chains and trade agreements are being restructured by the day and the globalization of tomorrow may look starkly different from its pre-COVID structure. Whatever comes next, global supply chains will continue to exist, but they likely will be complimented with regional and localized supply chains…and a much stronger emphasis on mutual collaboration.