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Are supply chain vulnerabilities increasing in the era of geoeconomic fragmentation?

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  • McCully, Tuuli
  • Simola, Heli

Abstract

We examine changes in the manufacturing sector value chains of the EU, US, China, and India between 2018 and 2023 by introducing three metrics for supply-chain vulnerability. For our first metric, the physical length of a supply chain based on the distance between the producer of the final product and input source country, we find modest evidence of near-shoring for the US, EU, and India. Second, utilizing political distances between the supply chain participants, our assessment of the geopolitical risks of supply chains reveals slight friend-shoring by the US and EU, mainly a result of Russia's reduced participation in their supply chains. Third, looking at the already extensive supply chain diversification of the studied countries, we find diversification has increased modestly since 2018.

Suggested Citation

  • McCully, Tuuli & Simola, Heli, 2024. "Are supply chain vulnerabilities increasing in the era of geoeconomic fragmentation?," BOFIT Policy Briefs 10/2024, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitb:307141
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    References listed on IDEAS

    as
    1. Laura Alfaro & Davin Chor, 2023. "Global Supply Chains: The Looming “Great Reallocation”," NBER Working Papers 31661, National Bureau of Economic Research, Inc.
    2. Christine Arriola & Mattia Cai & Przemyslaw Kowalski & Sébastien Miroudot & Frank van Tongeren, 2024. "Towards demystifying trade dependencies: At what point do trade linkages become a concern?," OECD Trade Policy Papers 280, OECD Publishing.
    3. Norring, Anni, 2024. "The economic effects of geoeconomic fragmentation," BOFIT Policy Briefs 8/2024, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. Simola, Heli, 2023. "Trends in Chinese value chains 2018-2022," BOFIT Policy Briefs 14/2023, Bank of Finland Institute for Emerging Economies (BOFIT).
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    Keywords

    global value chains; supply chains; fragmentation; value-added trade; input-output;
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