Friendshoring: what is it and can it solve our supply problems?

Janet Yellen Donald Trump Nancy Pelosi China Usa Russia Ukraine Taiwan COST covid-19 Manufacturing Cooper

06.08.2022 - 18:51

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theguardian.com:

Offshoring was followed by reshoring – and now US officials’ latest wheeze to deal with massive global supply chain disruption is “friendshoring”. The turbulent events of recent years – including Donald Trump’s trade wars, the Covid-19 crisis and Russia’s invasion of Ukraine – have called into question the vision of a globalised economy.

Many of the western companies that embraced offshoring – cutting costs by shifting manufacturing to countries with cheaper labour – have been encouraged by tariffs and pandemic supply chain disruption to bring production back to their home country, in a trend known as onshoring or reshoring.

However, in a report on America’s supply chains earlier this year, the Biden administration warned: “The United States cannot make, mine, or manufacture everything ourselves. We must cooperate with our allies and partners to foster and promote collective supply chain resilience.”

This is the crux of US Treasury secretary Janet Yellen’s proposal to move towards friendshoring, or allyshoring – manufacturing and sourcing components and raw materials within a group of countries with shared values. “Favouring the friendshoring of supply chains to … trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners,” she said in a speech at the Atlantic Council in April.

The US and its allies aim to safeguard supply chains by reducing their dependence on authoritarian regimes for materials such as rare earth and other minerals, and on Russia for commodities like gas, foodstuffs and fertiliser.

The US relies for semiconductors on Taiwan, which is under threat from China since last week’s visit by US House speaker Nancy Pelosi, so