DDG Hill noted that current supply chain shifts are driven by risk management, cost factors and emerging technologies. Recent crises — including the COVID-19 pandemic, geopolitical tensions and extreme weather — have exposed vulnerabilities in traditional supply chains. In response, many businesses are diversifying suppliers, shifting to “just-in-case” strategies and some are strengthening their local sourcing.
Also driving shifts in supply chains are rising labour costs in major manufacturing countries and technological advances, DDG Hill noted. An example is artificial intelligence, which can enable less skilled workers to contribute to complex production processes, potentially altering comparative advantages across countries.
Speaking about economic fragmentation, DDG Hill stressed that, according to WTO studies, splitting global trade into isolated blocs along geopolitical lines could reduce long-term global GDP by around 5 per cent. “And this is only the tip of an iceberg, as additional losses would come from reduced economies of scale, transition losses and financial distress, as well as fragmentation of data flows,” she said.
DDG Hill argued that economic fragmentation is not inevitable. Instead “re-globalization” — whereby economies and regions previously excluded from globalization are integrated into global supply chains — offers a pathway for equitable growth. Countries like Mexico, Viet Nam, Cambodia, Romania, Costa Rica, Türkiye and Morocco have benefited from expanding global-value chain participation, she said. She also pointed out that the share of supply chain trade in global trade rose from 44 per cent in 2020 to 49 per cent in 2022. By diversifying supply sources, companies reduce the risk of bottlenecks and component shortages, making the global economy more resilient.
DDG Hill emphasized that WTO members are increasingly supporting opportunities to help developing economies harness the benefits of investment facilitation, digital trade and growing service sectors. These initiatives are part of broader efforts to make supply chains less concentrated and more resilient, she added.
Organized by the Economist Impact, the panel also featured Feryal Ahmadi, Chief Operations Officer at the Dubai Multi Commodities Centre, Elizabeth Baltzan, Senior Advisor at the Office of the United States Trade Representative, and Roula Jeha, the Head of Central and Eastern Europe, Middle East and Africa Trade and Working Capital at J.P. Morgan. The discussion was moderated by the Economist’s Global Business Correspondent Anjani Trivedi.
Share
Reach us to explore global export and import deals