Many people seem to think that COVID-19 has exposed the vulnerability of global value chains and that local production can increase their resilience. This is not what the evidence suggests.

The most International value chain according to the OECD Trade in Value Added (TiVA) database is ICT & electronics. If foreign sourcing was an important risk, it should be the most vulnerable.

The ICT & electronics industry is familiar with supply chain disruptions related to natural disasters (floods in Thailand or tsunami in Japan in 2011). It is often under pressure when for example the latest smartphone is launched. Still it is very resilient.

The most impacted industries in the current crisis are services, starting with hotels and restaurants and transport, where value chains are less international. They are vulnerable because they rely on the movement of people.

Vulnerable industries in the manufacturing sector are those leaning towards local production (food and textile). They have perishable products or shorter production cycles making them more vulnerable to delays and supply disruptions.

Companies that have the objective to locally source all inputs are more vulnerable. They have to find suppliers in sectors where their economy has no comparative advantage. These suppliers are by definition rare and small firms that struggle to be profitable.

Moreover, firms that are purely domestic cannot spread risks over suppliers located in different countries. They do not have a network of foreign affiliates to reorganise production when one of their locations is affected by a crisis.

Global value chains are part of the strategy of firms to be more resilient. This will not change after the COVID-19 crisis to the extent that government policies still allow companies to best manage their risks.