Friendshoring

Why in News?

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

Highlights

• 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.
• 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.
• Also, as this becomes a trend, the world will gradually be separated, and it will be hard for countries to work together for the well-being of humanity.