Intel, Volvo CEOs, USTR, WTO Head Talk About How to Build Better Supply Chains
At a virtual World Economic Forum, U.S. Trade Representative Katherine Tai, the director-general of the World Trade Organization and CEOs in manufacturing and shipping said traders will change the ways they manage supply chains because of lessons from the COVID-19 pandemic. Tai said "the pandemic in particular has laid bare vulnerabilities in this version of globalization that we have and existing supply chains that we all feel strongly that we need to address."
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Intel CEO Pat Gelsinger agreed, noting how a $100,000 heavy-duty truck could wait to go to a customer over a missing $5 semiconductor chip. Gelsinger said, "We just got focused on the cost of [our] supply chain and the optimization of that, and we lost resilience and a geographic balance." Gelsinger said Intel will soon be announcing a new plant in the U.S. and a new one in Europe, and said that restoring chipmaking market shares on those two continents would make the global semiconductor supply chain more resilient. He said that after the financial crisis of 2009, governments required stress tests for major financial firms. "I think we have to look at stress tests on the supply chain going forward," he said.
The moderator asked if there are dangers in the government investments that Gelsinger is praising, if industrial policy will lead to protectionism and production that is not economic. Tai replied, "I’m sensitive to charges of nationalism, protectionism. I think that we need to be very, very alert to this present moment devolving from an opportunity to build a better version of globalization into one where we are fighting each other."
Volvo CEO Martin Lundstedt also warned that Europe's "strategic autonomy" push must be one that is open to trade. He said there is value in regionalizing supply chains, but that the globalization we've had in recent decades has had its benefits. He said policymakers should not be tempted to look for short-term answers.
"When we talk about 'just in time' or 'just in case,' that is maybe too simple," he said. A better way to create resilient supply chains is for original equipment manufacturers to know their complete networks, down to the fifth level of suppliers, and to evaluate whether vendors are partners in innovation "or is it a transactional system?"
The moderator asked the panelists what they fear could happen in trade after the pandemic. WTO Director-General Ngozi Okonjo-Iweala said she's worried that people will say that trade is partly responsible for worsening inequality in the world, and she said that's not true, trade is the solution to that.