To globalize or not: Everything you need to know about friendshoring

Source: The post is based on the article “To globalize or not: Everything you need to know about friendshoring” published in Business Standard on 17th November 2022

What is the News?

The US secretary of treasury has pushed for “friendshoring” to diversify trade away from countries that are present at geopolitical risk.

What is Friendshoring?

Friendshoring is also called allyshoring.

It is a strategy where a country sources 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.

Example: Friendshoring is already visible, with Western companies diversifying supply chains and investing beyond China. For instance, Apple’s announcement to shift its iPhone manufacturing facilities from China to India.

What are the implications of Friendshoring?

Firstly, friendshoring may push the world towards a more isolated place for trade and reverse the gains of globalization. It is a part of the “de-globalization” process.

Secondly, one of the important things about the global supply chain is that it allows firms to manufacture goods wherever it is cheapest. Hence, the final products become more affordable and consumers are benefited. With friendshoring, there can be a change in the dynamics of the global supply chain, restricting manufacturers and ultimately increasing costs for consumers.