Product dependencies, COVID-19 and the future of supply chains 30.11.2020
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30.11.2020 GFP WEEK OPEN WEBINAR SERIES Product dependencies, COVID-19 and the future of supply chains Prof. Lisandra Flach, ifo Center for International Economics Ludwig-Maximilians-Universität Munich
Outline
I. WORLD BEFORE COVID-19
II. THE IMPACT OF COVID-19 ON GLOBAL VALUE CHAINS
a. Direct and indirect effects of COVID-19 on the economy
b. Counterfactual analysis in a less globalized world
III. PRODUCT AND SECTOR DEPENDENCIES
a. Sector-level dependencies along the value chain using input-output tables
b. Product-level dependencies using import data
IV. THE FUTURE OF SUPPLY CHAINS
a. COVID-19: A digitalization/robotization booster?
b. Lessons learned and the future of supply chains
Seite 1 von 18
World Trade before
COVID-19
Seite 2 von 18
01 THE WORLD BEFORE COVID-19: SLOWBALIZATION
WTO creation China‘s entry at WTO Financial Crisis
35
30
AS % OF WORLD OUTPUT
25
20
15
10
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Güterhandel
Trade in Dienstleistungshandel
Trade in
goods services
Source: WTO (2020) and World Bank (2020), own calculation.
Seite 3 von 18
01 THE WORLD BEFORE COVID-19: GROWING PROTECTIONISM
Signs of growing protectionism
– Increase in the number of protectionist measures
– Despite the increase in the number of trade agreements, recent retreat from
regional liberalization, e.g. Brexit
Multilateralism has stalled
– WTO appeal court paralysed
– No agreement on new WTO DG
– WTO reforms are necessary, but not in sight
Seite 4 von 18
The impact of the
COVID-19 crisis on
GVCs
Seite 5 von 18
02 THE EFFECT OF COVID-19 ON GVC
Based on Steininger and Sforza (2020), Flach and Steininger (2020) quantify the
effect of COVID-19 on GVCs across German states
General equilibrium model that accounts for input-output linkages
Following Steininger and Sforza (2020), account for:
– Country and sector-level variation in lockdown measures
– Stringency of lockdown measures introduced worldwide (Hale et al., 2020)
and duration of government responses (CoronaNet)
– Degree of teleworkability across sectors (Dingel and Neiman, 2020)
Seite 6 von 18
02 THE EFFECT OF COVID-19 ON GLOBAL VALUE CHAINS (GVC)
direct effects
(lockdown in DE)
indirect effects
(through GVC)
Seite 7 von 18
COVID-19 HAS PUT GLOBAL SUPPLY CHAINS UNDER PRESSURE:
02
LARGE DECREASE IN REAL INCOME
Source: Sforza and Steininger (2020), „Globalization in the Time of COVID-19”, CEPR Press, COVID Economics.
Seite 8 von 1802 COVID-19: HETEROGENEOUS EFFECTS ACROSS GERMAN STATES
Source: Flach and Steininger (2020), "Globalisierung nach Covid-19: Die Folgen der Pandemie für die deutsche Wirtschaft." ifo Schnelldienst 73.07 (2020):
17-23.
Seite 9 von 1802 DEGLOBALIZATION IS NOT A SOLUTION! A COUNTERFACTUAL ANALYSIS
Source: Sforza and Steininger (2020) and Flach and Steininger (2020).
Seite 10 von 18Product and sector
dependencies
Seite 11 von 1803 SECTOR DEPENDENCIES USING INPUT-OUPUT LINKAGES: 17% OF GERMAN VALUE ADDED
IS CREATED THROUGH GLOBAL VALUE CHAINS. WORLD AVERAGE: 12%
Source: Flach, L., R. Aichele und M. Braml (2020), „Status quo und Zukunft globaler Lieferketten“, ifo Schnelldienst, 73(5), 16-22.
Seite 12 von 1803 SECTOR DEPENDENCIES USING INPUT-OUPUT LINKAGES: STRONG RELIANCE ON
NEIGHBORING COUNTRIES
GERMAN ECONOMY IS SUBSTANTIALLY MORE NETWORKED WITH EUROPE THAN USA OR CHINA
WITH THEIR NEIGHBORS. 12
10
Germany is therefore
more affected than 8
China or the US by
6
%
- regional lockdowns
4
- border closures
- drop in foreign 2
demand, in particular
from the EU. 0
2015 2005 2005 2015 2005 2015
China Germany USA
Factory Asia Factory Europe Factory North America
Source: Flach, L., R. Aichele und M. Braml (2020), „Status quo und Zukunft globaler Lieferketten“, ifo Schnelldienst, 73(5), 16-22.
Seite 13 von 1803 PRODUCT DEPENDENCIES: GERMANY AND MOST EU-COUNTRIES HAVE A HIGHLY
DIVERSIFIED SOURCING PORTFOLIO
100
12 12 15
23 26 26 26
29 30 31 27 29 31 30
35
80 43 41 42 41 44 43 43
51 49 50
33 58
37 34 64
60 34
84
36 36 36
37 36 35 39 38
36 38
35
29 33 32 35
40 32 35 36
30 34 34
55 30
51 51
25
20 43
38 37 37 34
34 34 34 33 32 32
30 28 26
26 24 23 22 9
18 21 17
17
12 11
8
0
GB MT LU CY IE EE LV BG HR SK FI PT GR LT SI HU DK AT SE CZ PL RO BE ES IT FR DE NL
1-5 Suppliers 6-15 Suppliers more than 15 Suppliers
© ifo Institut
Source: Flach, L., F. Teti, L. Wiest und M. Atzei (2020), „EU27 and the UK: Product Dependencies and the Implications of Brexit”, EconPol Policy Brief.
Seite 14 von 1803 PRODUCT DEPENDENCIES: GERMANY IMPORTS HIGHLY DEPENDENT PRODUCTS
MAINLY FROM THE EU27
32.5%
100%
80%
4.6%
4.7%
60% 5.0%
5.0%
5.1%
5.5%
40% 6.4%
7.1%
10.3%
20%
13.8%
0%
NL FR IT AT US GB DK PL BE CH RoW
Suppliers
Final goods Intermediates Capital Not classified
© ifo Institut
Source: Flach, L., F. Teti, L. Wiest und M. Atzei (2020), „EU27 and the UK: Product Dependencies and the Implications of Brexit”, EconPol Policy Brief.
Seite 15 von 18COVID-19: A
digitalization and
robotization booster?
Seite 16 von 1804 COVID-19: A ROBOTIZATION BOOSTER?
COVID-19 and robots: Correlation between sector-level losses
due to COVID-19 and robot intensity
• Robot-intensive sectors in Germany
were more severely hit by COVID-19
through indirect effect not surprising
because of high integration in GVCs
• In 2020: Delayed firm investments,
drop in demand, but positive long-run
perspectives
• Firm investment decisions:
resilience + increase in worker safety
new skills are needed (training!) Source: Flach and Steininger (2020) and IFR (2020).
Positive perspectives for services robots too: increased demand and new applications (e.g.
sanitizing and healthcare, >30 new disinfection robot models in 2020, IFR Data (2020)).
Seite 17 von 18FINAL REMARKS
• Large negative effects of COVID-19 on sectors integrated in GVCs, but
also direct effects of COVID-19 on the economy.
• Deglobalization and nearshoring do not make the economy more resilient
to global shocks!
• Diversification of the supply chains to increase resilience
• Global cooperation & Multilateralism (interdependencies)
• Trend towards more industrial and services robots
Seite 18 von 1830.11.2020 THANK YOU FOR YOUR ATTENTION! Lisandra Flach ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München e.V. Poschingerstr. 5 81679 München Phone: +49(0)89/9224-1423 Fax: +49(0)89/9224-1409 E-Mail: flach@ifo.de
References:
Flach, L., R. Aichele und M. Braml (2020), „Status quo und Zukunft globaler Lieferketten“, ifo Schnelldienst, 73(5), 16-
22.
Flach, Lisandra, and Marina Steininger. "Globalisierung nach Covid-19: Die Folgen der Pandemie für die deutsche
Wirtschaft." ifo Schnelldienst 73.07 (2020): 17-23.
Flach, L., F. Teti, L. Wiest und M. Atzei (2020), „EU27 and the UK: Product Dependencies and the Implications of
Brexit”, EconPol Policy Brief.
Sforza, Alessandro, Steininger, M. 2020. „ Globalization in the Time of COVID-19”. No. 8184. CESifo Group
Munich.
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