Friendshoring: How India can benefit from US' attempt to diversify supply chain

Friendshoring: The war between Russia and Ukraine and the imposition of strict Covid-19 restrictions in China have led to a disruption in the supply chain globally. Many countries are struggling with supply chain disturbance including the US.

On November 12, when U.S. Treasury Secretary Janet Yellen visited India, she had said that India is an indispensable partner for the US. She had pitched a ‘friendshoring' strategy to India, seeking to align trade and investment within a group of countries with shared values, in an apparent attempt to cut the role of China.

Stating that the bilateral trade between the two nations reached an all-time high of over USD 150 billion in 2021, Yellen said the recent disruptions caused by the pandemic and Russia's war in Ukraine are reasons to further deepen economic times.

"India is one of our trusted trading partners," she said. "In a world where supply chain vulnerabilities can impose heavy costs, we believe it's important to strengthen our trade ties with India and the large number of countries that share our approach to economic relations."

This strategy is called 'friendshoring', she said, adding the idea is to diversify the supply chain away from risky countries like Russia that seek to weaponise trade integration to advance their geopolitical aims.

On November 12, US India Strategic and Partnership Forum had said that US Treasury Secretary Janet Yellen's visit to India reflects the profoundness of bilateral ties, asserting that the strong commercial relationship has fructified due to the shared democratic outlook and strong people-to-people contacts.

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What is Frienshoring?

Friendshoring also known as allyshoring is a strategy where a country sources the raw materials, components and even manufactured goods from countries that share its values.

How did the term Friendshoring come into existence?

At the start of the Covid-19 pandemic, Bonnie Glick, then the deputy administrator of the United States Agency for International Development, was struggling to navigate the complex sourcing for essentials like H.I.V. medications and malaria vaccines.

The experience focused her attention on the fragility of global supply chains — and how they could be safeguarded. U.S. companies, she came to believe, should focus on making products at home (“reshoring” or “onshoring”), closer to home (“nearshoring”) or in countries aligned with U.S. interests — a concept that lacked an established term but that she called “allied shoring.”

As the idea caught on, the terminology evolved. Last June, two economists at the Brookings Institution wrote about “ally shoring,” crediting Ms. Glick for the term. This past June, the White House included “ally and Friendshoring” in a report on building resilient supply chains.

Is this the first time Janet Yellen mentioned Friendshoring?

Janet Yellen had mentioned the term in a speech at the Atlantic Council in April. She said the US would continue "favouring the Friendshoring of supply chains" to "securely extend market access".

Pros of Friendshoring

It will help India in strengthening its relationship with the US and also in increasing domestic manufacturing and export.

Cons of Frienshoring

Friendshoring may push the world towards a more isolated place for trade and reverse the gains of globalisation. It is a part of the "deglobalisation" process but Yellen, however, said that friendshoring was "not limited to an exclusive club of countries" and that the US believes in "economic integration".

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