Friendshoring: What is it? Can it solve our supply problem? | | International Trade

ffshoring was followed by reshoring. Now, the latest wheeze of US officials to deal with disruptions in his chain of massive global supply is “friendshoring.”Turbulent events in recent years – including Donald Trump’s trade warthe Covid-19 crisis and Russia’s invasion of Ukraine are calling into question the vision of a globalized economy.

Many Western companies that have adopted offshoring cut costs by moving manufacturing to countries with cheaper labor, but supply chain disruptions caused by tariffs and the pandemic have led to what is known as onshoring or reshoring. The trend is to move production back to the home country.

But in a report on America’s supply chains earlier this year, the Biden administration cautioned: We must work with allies and partners to foster and promote resilience across our supply chains. ”

This is at the heart of US Treasury Secretary Janet Yellen’s proposal to move to friend- or ally-shoring, the manufacturing and sourcing of parts and raw materials within groups of countries with shared values. “By favoring friend-shoring of supply chains to trusted countries, we can continue to safely expand market access, lowering risks not only to trusted trading partners but also to the economy,” she said. said. Speech at the Atlantic Council in April.

The United States and its allies will protect supply chains by reducing reliance on authoritarian regimes for materials such as rare earths and other minerals, and on Russia for commodities such as gas, food and fertilizers. We aim to

The United States depends on Taiwan for semiconductors. under threat from China It has stepped up its engagement with South Korea since U.S. House Speaker Nancy Pelosi’s visit last week. On my recent trip to Seoul, Joe Biden tours South Korean chip factory This will serve as a model for another plant in Texas. Human rights and national security concerns could cause Western countries to shift production and jobs from China to “friendly” countries such as Indonesia, Malaysia and Vietnam.

But economists say there is a price to pay. Friendshoring is part of the ‘deglobalization’ process, which could lead to further supply shocks and higher prices in the short term and slower growth in the long term.

“Although keeping the supply chain away from East Asia could make us safer in the long run, the misimplementation of this friend-shoring strategy could lead to price increases and China’s strength over time. ‘The Institute for Strategic and International Studies Report on securing the semiconductor supply chain last week.

Not surprisingly, Yellen expressed hope To “not go into a polarized world and maintain the benefits of deep economic integration with China” as long as China addresses Western concerns about human rights and national security.

Friendshoring: What is it? Can it solve our supply problem? | | International Trade

Source link Friendshoring: What is it? Can it solve our supply problem? | | International Trade

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