The Era of Changing Supply Chains

BESA Center Perspectives Paper No. 1,788, October 27, 2020

The world is an increasingly unstable place. This is reflected in the way supply chains, a pillar of the globalized world, are changing. More and more countries are considering moving away from their dependence on China to the Indo-Pacific region, which has a burgeoning population and rising economies. This process will accelerate as differences between the West and China multiply.

For Israel this means continuing to walk the diplomatic tightrope as a result of the many Israel-China agreements that have been entered into. There are the ongoing suspicions of the Chinese government as the COVID-19 pandemic ramped up discussion about changing global supply chains. This notion was present before the epidemic, when tensions with China were growing on a number of fronts: trade; Beijing’s geopolitical ambitions related to its flagship project, the “Belt and Road Initiative” (BRI); issues related to Hong Kong; and ethnic problems in Xinjiang and Tibet.

 The trend is growing in intensity as the West’s disagreements with Beijing approach the insurmountable.In this difficult year, the West has come to see how vulnerable it is to supply chains that are largely focused around China. To prepare for future disruptions, it is expedient for the West to evaluate the possibility of reorienting supply chains of major products toward countries that are geopolitically close.

An interesting development in the West’s rhetoric over the course of Beijing’s handling of the pandemic is its near-complete disillusionment with China’s government system. This made calls for reorienting supply chains to democratic countries more insistent. As has become clear, at least as far as the rhetoric suggests, democracy now matters as much as or even more than access to a cheap workforce.