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The Impact of Automation on Global FDI

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The Impact of Automation on Global FDI

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Identify Projects & Get Qualified MeetingsAfter the 2008 financial crisis there was a significant decrease in global trade of manufactured goods. This was seen to be a blip caused by the crash, however levels have failed to recover to pre-recession levels. Cross-border trade in services, such as IT, telecoms, and transport however, are growing.

In the 1980s, 90s, and early 2000s, global trade in manufactured products was characterized by North American and Western European companies offshoring manufacturing to lower-wage countries, such as Southeast Asia and Latin America. Products were manufactured where workers were paid a fraction of their counterparts at home, and then put onto a container and shipped to the consumer markets.

However, the increase in automation on the factory floor has led to a decreased emphasis on high-volume, low cost labor, and more of a focus on a smaller number of higher qualified, better trained workers. This is also allowing companies to produce closer to their end customers, often businesses or consumers in developed markets.

For an economic developer in North America or Western Europe, this leads to increased opportunities to attract investments and jobs back from lower cost countries. Being able to position your region as a hub for advanced engineering training, with a strong workforce and investments in advanced infrastructure (5G networks, AI technology development, a start-up ecosystem, etc.) will give you a strong advantage in landing these kinds of projects in the future.

To listen to some great discourse on this topic, we would recommend listening to this podcast by the McKinsey Global Institute.

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