Context : In her visit to India last week, US secretary of treasury Janet Yellen reiterated her country’s stance of pushing for “friendshoring” to diversify away from countries that present geopolitical risk.
What is Friend shoring strategy?
- Friend-shoring means encouraging companies to shift manufacturing away from authoritarian states and toward allies.
What are the objectives?
The idea of ‘friend-shoring’ supply chains is gaining purchase among economic policymakers concerned about relying on geopolitical competitors for accessing critical materials and technologies.
What are the benefits?
- Friend-shoring is about deepening relationships and diversifying our supply chains with a greater number of trusted trading partners to lower risks for our economy and theirs.
- It will also encourage domestic production, which could substitute for imports.
What are the Impacts for ‘Freindshoring’?
- It would reduce overdependence on countries which could pose a security risk and are a single source of critical inputs and raw materials.
- However, limiting the trade of key inputs to trusted countries could reverse the gains of globalization.
Indian Context:
- For India to benefit more from friendshoring, it must participate more deeply in regional blocs like the US-led Indo-Pacific Economic Framework (IPEF)
- Although India joined the grouping, it has for now opted out of the trade pillar, which is one of the four pillars of this bloc that aims to enhance supply chain resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness.
Read more : Wassenaar Arrangement
