Rather than put them under scrutiny, “we should pay homage to these
supply chains that have showed extraordinary resilience after
withstanding successive shocks like Fukushima, flooding in Thailand and
now Covid-19,” Aschenbroich added.
In the wake of the global pandemic, which is causing the steepest
recession in almost a century, the European Union has proposed a 750
billion-euro ($843 billion) recovery package that could aim to ensure
“strategic autonomy” in key sectors and stronger value chains within the
EU.
European Central Bank Executive Board Member Luis de Guindos and Dutch
central bank Governor Klaas Knot have independently argued that
companies should consider moving parts of their supply chains closer to
home even if that meant higher costs.
At the weekend conference in Paris, ECB President Christine Lagarde said
the crisis would lead to changes in manufacturing, with an estimated
contraction of supply chains of about 35% and increase in industrial
robotization of 70% to 75%.
Evidence on the ground suggests a massive shift back to Europe is
unlikely in the near-term because of the ever-growing importance of
China and the difference in manufacturing costs.“I don‘t see a massive
relocation,” Rodolphe Saade, CEO of CMA CGM SA, the world’s
third-largest container shipping company, told the conference. While the
transporter is seeing greater “intra-regional” volumes within Asia and
Europe, he said consumers will “continue to buy televisions and other
goods made in China because they are much cheaper to build than in
France and elsewhere in Europe.”
To counter Asian dominance, politicians may have to resort to
hard-charging policies and subsidies to convince companies to get on
board, as was the case with electric-car batteries. France and Germany
have pooled efforts to kick-start a European industry.
“Weve managed to build an agreement between governments -- France and
Germany -- and companies to face the challenge together,” Patrick
Pouyanne, head of Total SA, said Saturday at the conference. “It
requires significant subsidies.”
“We‘ve decided that it was worth taking that risk,” he said of the oil
giant’s participation in the project. “Why? Because one lesson for
companies like us isnt relocation, but diversification of supply chains.
We know about geopolitical risks, and the need to diversify.”
The political effort to bring industry home is particularly intense in
France. New Prime Minister Jean Castex spent part of Saturday at a
semiconductor company where he hammered home the need for more
industries to relocate to safeguard jobs. French President Emmanuel
Macron has tied roughly 8 billion euros in aid to the struggling auto
industry to increasing domestic output.
“Industry has fled the country because we didnt take care of it,” said
Eric Lombard, head of state-controlled financial institution Caisse des
Dépôts et Consignations. “Last year, for the first time in 20 years,
more factories opened than closed in France. This is the result of
proactive measures.”
