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Manufacturing Coming Home - The Economics of Re-Shoring

Graham Watson

13th March 2024

This is a really good article from the BBC about reshoring and the factors that are currently driving it: higher wages in previously low-wage economies, a desire to get things quicker, the risks associated with an extended global supply chain. It also introduces some concepts that I'm not familiar with: "near shoring" and "friend shoring" which are associated with reducing the risks of the global supply chain

Reshoring does not necessarily mark a turning point for globalization, but it does represent a shift in the way companies structure their operations and supply chains. Globalization, as a process of increased economic integration and interconnectedness among countries, is still a powerful force shaping the world economy. However, the trend of reshoring indicates that companies are reevaluating their strategies and considering the benefits of bringing production closer to their home markets.There are several reasons why reshoring may not mark the end of globalization:

  1. Global supply chains remain important: While some companies are reshoring certain aspects of their production, many continue to rely on global supply chains for raw materials, components, and finished goods. The complexities and cost advantages of global supply chains mean that they will continue to play a crucial role in the world economy.
  2. International trade continues to grow: Although the rate of growth in international trade has slowed in recent years, it continues to expand overall. This indicates that countries remain interconnected and dependent on one another for goods and services.
  3. Technology and digitalization: Advances in technology, such as automation, artificial intelligence, and digital platforms, continue to facilitate global connectivity and trade. These technological innovations enable companies to maintain and expand their global operations even as they consider reshoring some aspects of their production.
  4. Regionalization and trade agreements: Rather than a complete reversal of globalization, reshoring might be seen as part of a broader trend towards regionalization. Companies may choose to focus their operations within specific regions to benefit from proximity to key markets and participate in regional trade agreements.
  5. Global competition: Companies continue to face competition from both domestic and international rivals, which encourages them to maintain a global outlook and presence. This competition drives innovation and efficiency, which can be crucial for a company's long-term success.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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