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“Friendshoring"

Dec 5, 2023
Global turmoil including COVID and the war in Ukraine is leading many companies to source raw materials from “friendly countries,” according to El PAIS, but organizations such as the International Monetary Fund and the European Central Bank warn of the impact overall on global trade.

Global turmoil including COVID and the war in Ukraine is leading many companies to source raw materials from “friendly countries,” according to El PAIS, but organizations such as the International Monetary Fund and the European Central Bank warn of the impact overall on global trade. 

"The zero covid policy, which put the global supply chain in turmoil, compelled Apple to decide to move production from China to India...This is just one example, as the United States and the EU look to countries with similar ideas and policies, in other words, ones that are less likely to engage in conflict, in order to protect their companies. This is what is known as ‘friend-shoring’. 

According to a report cited in the article, "European companies attribute 'geopolitical risk' as the main factor behind their decision to relocate their business.”

“That highlights a shift in companies’ priorities from just focusing on cutting costs or improving efficiency to also bringing resilience into their decisions,” the report says. "When asked how they were going to do this, they gave three answers: 

1. by moving production closer to the country of the parent company

2. by diversifying suppliers geographically and

3. by choosing countries that are close to them politically.

"The IMF, which at its recent annual meetings in Marrakesh warned about the retreat into blocs, has pointed out in several studies that geopolitical tensions have led to a reconfiguration of investment flows...Although the advantages of relocating this capital could afford greater security to companies, the (IMF) also believes that this relocation could be detrimental to growth."

Global Trade Offshoring
David Harrison