In a world rocked by shocks of brutal and unexpected intensity, a word that can change everything is becoming more and more fashionable: friendshoring.
A set of recent changes has led some to question the advantages of a global economy: first the US trade war with China, then Covid and its impact on the supply chain, and now a war in Ukraine that it can reshape the geopolitical landscape. While some were still talking about onshoring or reshoring – recovering production to reduce the risks of global supply chains – or sanctions – punishing countries like Russia economically – Treasury Secretary Janet Yellen coined the word friendshoring to refer to the limitation of trade in key supplies only to friendly countries: “those that share the same values and strategic interests”.
Friendshoring is a word that sounds good enough to be embraced by different walks of the political spectrum and society. If so, it can significantly change the economic world we know, putting geopolitical considerations before those of efficiency and local production in globalization. There are even those who argue that it promotes democratic values by giving incentives to countries to share values in order to be part of the group of “friends”.
The reality, however, is that what it does is contribute to the division of the world into blocks. The World Trade Organization has recently warned that in a world divided into blocs, GDP would drop by 5%, restricting competition. The supply chains we know today have transformed global production by allowing companies to produce where it is cheapest, giving poorer countries access to goods they previously could not afford. Furthermore, friendshoring can perpetuate a situation that should not always be like this. As Alfredo Pastor already said in this newspaper a few days ago, Russia will not always be Putin and who tells us that the US will not have another Trump? Identifying international friends is not always trivial and much less permanent.
In an environment where the concept of conflict is gaining ground, not trading with “the enemy” may seem to make sense, but we cannot forget that trade also helps us talk to each other and forge peace and diplomatic relations. In addition, many of the most important challenges in the world today are global: public health, climate change, etc. When that is the case, instead of talking about enemies we should think about partners. Add to that the impact of Russia's war in Ukraine on food prices, which could have dire consequences on world hunger and which friendshoring could aggravate. Although at the moment the main concern of the markets seems to be focused on the dangers of a recession, moving towards a more fragmented world would have much worse structural consequences for the economy. We Europeans would have to think about it several times before entering a game that could prolong this bloc situation.
