Managing COVID-19: Could the coronavirus spur automation and reverse globalization?
Automation and reshoring mitigate the risks firms face in the event of a pandemic or other shocks. Industrial policies that aim to strengthen a country’s healthcare sector and reduce its dependence on global supply chains could further accelerate this trend.
The current COVID-19 pandemic has disrupted and fully exposed the vulnerabilities of global value chains (GVCs) which are synonymous with globalization and characterized by high interdependencies between global lead firms and suppliers located across several continents. Many countries are currently facing supply shortages of critical medical equipment in the fight against the virus. Firms and nations are also facing risks associated with protectionist national trade policies: high import tariffs may have caused shortages of critical medical products and equipment from China in the United States, while export restrictions on medical supplies may have exacerbated supply shortages.1
Industry 4.0 is a term firmly associated with the fourth industrial revolution and refers to a set of advanced digital production technologies, such as advanced robotics, 3D printing, big data analytics and artificial intelligence, among others.
Long before the COVID-19 pandemic, in an effort to mitigate supply chain risks, increase flexibility and improve product standards, global lead firms have relied on Industry 4.0 technologies and occasionally reshored parts of their production. Even in developing countries like Bangladesh, for instance, contract manufacturers in the apparel industry have started replacing workers with robots to adapt to increasing wages.2In view of those pertinent changes, this article aims to examine two interrelated and policy relevant questions, namely: could the current crisis further spur automation and reshoring in GVCs? And, thus, could a subsequent reversal of globalization lower the prospects for development through increased GVC participation?
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