COVID-19 and Global Value Chains

Abstract

The international fragmentation of production based on the Global Value Chains (GVCs) model has been challenged during last years by several forces such as the macroeconomic changes, the digital transformation, the made-in effect, the rise of nationalisms and trade wars, and the increasing attention for environmental and social sustainability. The Covid-19 is expected to accelerate firms’ relocations and GVCs’ reconfigurations either towards closer locations (i.e. near-shoring) or back to the home countries (i.e. back-reshoring), thus acting as a trigger. In this chapter, we propose a 5W framework to explain the “Why” (Covid-19), the “Who” (single firms vs. manufacturing network), the “When” (short- vs. long-term), the “Where” (home country vs. home region) and the “What” (the object of the relocation) of this phenomenon. The framework helps in identifying four possible relocation modes triggered by Covid-19, namely individual or joint back-reshoring and individual or joint near-shoring. We also show how real cases can be explained by our framework and provide examples of the identified alternative relocation modes. Finally, we discuss “How” policymakers can provide a significant contribution by switching their attention from the single firms to the entire value chains, by restoring manufacturing skills and infrastructures, and by cooperating at macro-regional level (e.g. European Union) rather than acting only at national level in order to foster the near-shoring of the GVCs, thus giving birth to regional value chains.