Alicia García Herrero (Bruegel): “Value chains are now based not on efficiencies but resilience”
“Value chains are no longer based on efficiency: they now focus on resilience and adapting to an increasingly uncertain and volatile global environment.” With these words during the second session in the series ‘The impact of geopolitics on the agendas of Boards of Directors’, Alicia García Herrero, economist and senior fellow at Bruegel, highlighted the paradigm shift in international trade marked by fragmentation and politicization. Business decisions no longer depend solely on cost efficiency, but also on the ability to withstand geopolitical and economic risks.
This remark was made during an event held on the Esade Madrid campus, and organized by the Esade Corporate Governance Center and EsadeGeo, to address the slowdown in globalization, the restructuring of supply chains and the politicization of assets in different sectors of the economy. In the current landscape, the tech war between China and the US, in addition to the politicization of foreign trade and growing protectionism, has had a considerable impact on international trade and the importance of efficiency in explaining how today’s value chains work. The friendshoring fostered by the Biden administration benefitted countries such as Mexico and Vietnam but Trump’s return to the presidency has marked a change of tack towards a more pragmatic, transactional American foreign policy.
During her talk, García Herrero warned about China’s huge influence in key sectors, with very small market shares for actors such as the US or the EU in key goods, and the response of these powers. “The critical dependence on China for strategic materials is of concern,” she said, “and to a certain extent, this explains Trump’s efforts to reduce his exposure.” However, she warned that America’s attempts at reshoring or nearshoring are not easy to replicate because Europe lacks the capacity to completely renegotiate or replace its presence in Asian supply chains.
Another key point in her presentation was the US stance on global trade. “The US strategy of attracting industrial investments and imposing tighter restrictions on China is significantly impacting the reconfiguration of value chains,” she explained, pointing out that unless Europe achieves a more close-knit internal market, it runs the risk of having less clout in this new geoeconomic scenario.
García Herrero also warned that prolonged deflation could leave the Chinese economy in the doldrums and affect the balance of global geopolitics. “China is no longer converging with the US in nominal terms and this could change the dynamics of global power,” she explained.
In order to tackle these issues, the economist urged Europe to seek new alliances and diversify its markets. “Europe must stop simply looking inward and must bolster its links with strategic partners such as Australia, Turkey, India and Latin America. Withdrawing from supply chains can never be the only solution,” she concluded.
Challenges facing supply chains and corporate governance
Ramón Sotomayor, a board member at Velatia and former CEO of Antolin and ThyssenKrupp Elevators, underlined the challenge to companies adapting to an economic and political environment in constant flux. “Boards of directors must make geopolitics a key element integrated into their strategic decision-making. It’s not just a question of efficiency and profitability, it’s about anticipating and mitigating the risks of global uncertainty,” he explained.
Sotomayor emphasized the need for greater transparency and structured analysis inside boards of directors. “Companies have traditionally had an endogamous view of the world, but now it’s essential to compare information with outside experts and open up this viewpoint to span more than the sector itself,” he said. He also insisted on the importance of diversifying markets and sources of supply to ensure business stability, and ended by saying that “We cannot depend on a single region or supplier. Resilience means diversifying and building strategic supply networks.”
Also taking part were Mario Lara, director of Esade Madrid and the Esade Corporate Governance Center, and Ángel Saz-Carranza, director of EsadeGeo, who both gave the introduction and welcome to the event.
