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World Affairs, I.R.
Mahesh

18/11/22 13:13 PM IST

Friendshoring

In News 
  • Recently, the US secretary of treasury has pushed for "friendshoring" to diversify trade away from countries that are present at geopolitical risk.
Friendshoring 
  • Friendshoring is a strategy where a country sources the raw materials, components and even manufactured goods from countries that share its values. The dependence on the countries considered a "threat" to the stability of the supply chains is slowly reduced.
  • It is also called "allyshoring".
  • For the US, Russia has long presented itself as a reliable energy partner, but in the Ukraine war, it has weaponized the gas against the people of Europe.
  • It's an example of how malicious actors can use their market positions to try to gain geopolitical leverage or disrupt trade for their own gain.
  • Friend-shoring or ally-shoring has become a means for the US to influence firms to move their sourcing and manufacturing sites to friendly shores—often back to the same shores in the case of the US.
  • The purpose of Frienshoring is to insulate countries’ supply chains from less like-minded nations, such as China in case of the US.
Implications 
  • Friendshoring may push the world towards a more isolated place for trade and reverse the gains of globalization. It is a part of the "deglobalisation" process.
  • After the global economy has been influenced by the years-long lockdown of Covid-19, any form of protectionism will further disrupt the already unstable global supply chain.
  • This new form of protectionism will not be conducive to globalization while affecting the global supply chain and economy. And in the long term, this could backfire if a company relies on some country—for lithium for batteries, say, or precious metals for computer chips—feels alienated.
Source- Business Standard 

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