Virtual panel participants from the World Trade Organisation, UNIDO and mPedigree.
Losing Out to Industrial Automation
COVID-19 will accelerate industrial automation and allow manufacturers in developed countries to compete effectively with lower labour cost markets, according to panel discussion participants from the WTO, United Nations Industrial Development Organization (UNIDO) and Africa-based technology company mPedigree.
The discussion during the Virtual Edition of the Global Manufacturing and Industrialisation Summit (#GMIS2020) also highlighted the repatriation of manufacturing production by some multinational companies in response to unprecedented disruption the pandemic has caused to global value chains; and concluded developing countries must respond by developing local industrial capabilities with new technologies and skills that will allow them to become more integrated into world trade.
Xiaozhun Yi, Deputy Director-General of the World Trade Organization (WTO), argued more than a third of the predicted decline in world trade brought on by the COVID-19 pandemic was caused by a rise in trade costs and temporary disruptions to transport and logistics - stressing that the future structure of global supply chains depends on whether the pandemic accelerates two key trends which have been underway for several years; namely, China moving up the value chain due to its industrial strategies or rising labour costs, and the increasing adoption of labour-saving technologies in modern manufacturing.
However, he said he believes governments of developing countries can still attract multinational companies by introducing measures to limit trade costs, such as lifting tariffs and minimising travel restrictions and border controls.
Cecilia Ugaz Estrada, Special Advisor, Directorate of Corporate Management and Operations, United Nations Industrial Development Organization (UNIDO), agreed automation erodes the comparative advantage that low-cost labour gives developing countries over developed countries; and that this can lead to production being brought closer to the headquarters of transnational corporations at the head of global value chains. Her argument, however, was that the best response to this shift from developing countries would be to accelerate efforts aimed at achieving closer regional integration as this would allow an expansion of trade with more neighbouring countries.
Bright Simons, Founder and President of Africa-based technology company mPedigree, said COVID-19 has affected regional trade in Africa as much as global trade and that in some cases regional trade is more impacted. He cited a number of barriers to expanding regional trade within the continent, including high transportation costs, which can make it more expensive to trade within Africa than to trade internationally. He added: "It’s not that easy, even if you wanted to, to maintain a sourcing regime that involves cutting yourself off from global value chains."
"What virtual capabilities now enable is to reduce the cost of skills importation, so we have had situations where certification bodies are now able to conduct end-to-end audits online.
"That cuts costs by as much as 95% and this for the first time makes it possible for some SMEs to meet these demands and be able to export overseas."
Hosted by former BBC Journalist, Declan Curry, the virtual panel discussion on 'Glocalisation: localising production and capacity building for survival and success' was the first of a sequence of weekly sessions of the #GMIS2020 Digital Series that commenced today, and will lead up to a Virtual Summit between 4 and 5 September 2020. The session is available to watch on-demand at https://bit.ly/2YHVHyY.
At the top of the agenda for discussion during #GMIS2020 virtual edition will be digital restoration – how 4IR technologies are helping to restore the global economy and overcome unprecedented challenges.