The restart of the industrial machine of the Northeast is not yet fully operational. There are many positive signals coming from the various districts, but there are also some unknown factors. For example, the voices of companies complaining of hitches in the procurement of raw materials, delivery times that are increasingly expanding and prices, net of the inflationary curve, are becoming more and more widespread. From wood to building materials, reaching the most complex semi-finished products, there are serious difficulties in finding the goods necessary to feed the "contractor machine" of the Northeast. Furthermore, the transformations that are taking shape along the organization of world production chains are grafted into this scenario. Gianluca Toschi, economist at the University of Padua and researcher at the Nordest foundation, he edited the part relating to changes in the global value chains for Northeastern companies within the 2020 Report.
Professor Toschi, has the pandemic further increased doubts about the sustainability of these very long supply chains of global manufacturing?
«The production chains have been designed and optimized over the years to become precision watches. Very efficient but also very fragile. Let's think of "lean production", zero inventories and zero inventory. A paradigm based on maximum efficiency but which exposes to risks. Covid was the first great test of strength and the system structured in this way did not hold up, or rather it did not hold up according to expectations ».
What has the pandemic made more evident than this fragility?
«Since the closure of Wuhan we have closed the whole world a little at a time. The fragility is given primarily by the very strong concentration of suppliers in Asia. If Asia stops or changes its strategy, the rest of the world is watching. But that's not all: think of the recent case of Suez, the delay of just one week drove the system "crazy".
In recent months, the risk associated with the supply of industrial materials has also been added: what is the relationship between the transformations taking place in the supply chains and this shortage of materials?
«Certainly the so-called "whiplash effect" is involved, caused by the constant "stop and go" of the economy. But it still seems to be a generalized trend, from wood to steel, there are many industrial sectors that complain about very long delivery times and sharply rising prices».
How will the dependence of the Western economy on specific areas of the world, distant geographically and distant in interests, change global value chains?
“Global value chains (GVCs) are set to undergo a significant regionalization process. An increasingly significant part of trade and industrial production will take place within the regions of the world, understood as Europe, the United States, Canada, Mexico and Asia. Projecting one's production networks outside the region will increasingly become a high-risk investment. Both because of the issues we have discussed and because of the fear of new phases of tariff imposition. If I'm afraid of European tariffs on Chinese or Indonesian goods, it's better then to invest in your own region, or in your own free trade area".
What could this new geography of warehouses mean for Italy?
«New opportunities for those who know how to seize them. Furthermore, the latest generation technologies, robotics and artificial intelligence allow ever smaller and more efficient production plants, able to quickly serve more markets. Technology reduces the impact of economies of scale. An era of low interest rates helps this propensity for technology investments even more».
And for the Northeast?
«Two regions of the so-called Pentagon, such as Veneto and Emilia Romagna, have similar approaches and values towards global value chains. Italy in general has a solid manufacturing base, but these two regions could have even more attractive characteristics for reshoring and regionalization operations».
Will Joe Biden's new foreign policy towards China, Russia and, for example, Turkey give further acceleration to the ongoing process?
«Tensions will increase and the push for regionalization will be increasingly strong. The last major expansion of international trade players, in the early XNUMXs, was driven by a powerful political process of "detente". The opposite of what is happening today. Large companies will also be able to trust in the stability of relations with Turkey, but they will certainly diversify their suppliers and will not depend entirely on Turkish plants».
International politics seems to have fully returned to industry.
"It always has been."
