The Shockwaves of the Corona Crisis on Global Value Chains

This MOOC proposes a stylized analysis of the three shockwaves of the COVID-19 epidemics on global value chains. The first shockwave, in January and February 2020, triggered immediate global recessionary forces as the disruption of supply chains resulting for the lockdown in some Chinese regions shocked the activity of some manufacturing facilities across the globe. The second wave followed the geographical amplification of the restrictions on human circulation, which resulted in asymmetric reductions of supply and demand, leading to a combination of bottlenecks and gluts with severe medium term implications for the recovery. The third wave results from the interplay of two diverging forces. On the one hand, the acknowledgment of strategic vulnerabilities resulting from just-in-time global sourcing will foster a wave of reshoring of manufacturing activities through a combination of revisited business strategies and politically-driven institutional change. This phenomenon will be all the more important that the balance between the gains and losses from offshore manufacturing were already tilting towards the second as a result of the rise of labor costs in manufacturing hubs of the global south and the prospects of further automation in some area. On the other hand, in the absence of significant regulatory change, the learning effects resulting from the shift en masse to teleworking during the corona lockdown will dramatically accelerate global sourcing in services. Overall, the balance of the corona crisis on globalization dynamics remains uncertain and will depend of the relative strengths and shapes of two forces: securing the socioeconomic existence through a territorial re-embeddness and geographical de-specialization versus the acceleration of a shift of economic activity to a partially de-territorialized digital landscape.