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Minister Tovar, Dear Manuel, Ministers, Ambassadors, colleagues, friends all,
A very warm welcome to the launch of this, the very first OECD Supply Chain Resilience Review.
This Review provides the OECD’s latest analysis on supply chain interdependencies, trade concentration and regulatory barriers, leveraging our unique data and evidence base.
Global supply chains are a key foundation for our economies.
They enable the efficient production and distribution of goods and services across borders, lowering costs for businesses and consumers.
They facilitate innovation through global collaboration, while supporting millions of jobs by linking industries and markets around the world.
They offer the benefits of efficiency, competition and innovation to consumers,
And they provide businesses with critical inputs.
Indeed About 60% of global trade today consists of intermediate products,
And they serve as a powerful driver of growth and opportunity across OECD and non-OECD countries alike – by facilitating connectivity to markets around the world.
Indeed about 15% of all goods and services produced within the OECD are consumed in countries outside the OECD.
Developments in recent years have illustrated the need to enhance the resilience and security of these supply chains,
We have seen a range of supply chain risks emerge and evolve, in the wake of
The impact of the COVID pandemic;
Wars and conflicts;
Natural disasters and extreme weather conditions;
Policy choices in some countries when it comes to the provision of market distorting subsidies and other policies that can undermine industrial capacity in market-based jurisdictions,
To instances of economic coercion and or trade restrictions, to
Very practically, physical bottlenecks in transport networks.
Our Review shows that concentration in our supply chains is on the rise.
By extension so are the risks of disruptions.
On average across all countries, based on an assessment of about 4,800 globally traded goods, by the time of the early 2020’s the proportion of import-concentrated goods had increased by about 50% compared to the late 1990s.
Globally, in the 2020-22 period, 30% of the level of concentration in import markets came from Chinese exports – the highest among all countries and up from just 5% in the period 25-23 years earlier.
Our analysis also shows that simply re-localising production is not the answer.
We estimate that addressing high concentration by focusing only on relocating production domestically would reduce global real GDP by more than 5%.
We estimate that individual OECD countries would lose between 3.2% and 13.1% of GDP, while creating new vulnerabilities to external shocks at the same time.
Instead, we need to draw on new, untapped sources of supply globally, and enhance the flexibility of global supply chains, in particular for products with significant levels of import concentration.
Key opportunities for diversification include expanding trade and investment linkages with Latin America and Africa on minerals, India on pharmaceutical and some Southeast Asian countries such as Thailand for plastics. There are other opportunities.
The objective must be to boost economic security and supply chain resilience while preserving the economic benefits of open markets and rules based global trade.
Towards this, our Review highlights several policy priorities:
First, simplifying customs and border procedures for goods.
More efficient logistics and transport networks can help firms shift supplies and distribution with minimal delays and costs,
And digital tools and paperless customs procedures can speed up clearance time and improve transparency.
Our latest Trade Facilitation Indicators shows that bottlenecks and red tape at borders have decreased in recent years, with estimated trade costs decreasing by up to 5% over the last decade.
We must continue these efforts.
Second, removing unnecessary trade barriers in key supply chain services such as transport and logistics services.
Trade barriers in these sectors have been rising, leading to higher costs and undermining flexibility in manufacturing supply chains.
We estimate that lowering trade barriers to global supply chain-related services could result in trade cost reductions of between 5% and 14% on average across all countries, with the highest impact in air transport with up to 24%.
Third, lowering regulatory barriers that affect cross-border data flows to support firms’ agility and responsiveness to disruptions.
Real-time data exchanges help suppliers better manage their inventories, coordinate production across countries, anticipate changes in demand and react more swiftly to sudden disruptions.
However, requirements to collect, process or store personal or business data within a country’s borders, have more than doubled over the past ten years.
While these measures enhance the security of data flows, they also reduce the ability of businesses to adapt to real-time changes in supply chains.
Enabling the flow of data across borders with appropriate safeguards and protection will allow firms to proactively monitor, anticipate, and respond to emerging shocks.
In closing,
The risks of global supply chain disruptions have grown, and could have significant impacts on our economies and societies.
However, we have the policy tools to unlock new sources of supply and economic opportunity,
By alleviating administrative and other barriers to trade,
And supporting better functioning global markets and a level playing field.
The OECD will continue to provide our unique evidence base and analysis to support policymakers in deploying these tools for more resilient, adaptable and reliable supply chains.
Thank you.
Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.