The Changing Face of Globalisation - From Near-shoring to Friend-shoring
Mohamed El-Erian writes a Project Syndicate column looking at the changing nature of trade in the post-Covid world. He argues that we're moving away from hyperglobalisation, not so much towards reshoring, but shortening supply chains by relocating business operations in cheap, but close, locations instead. He suggests that this might be called 'near shoring' and that is represents a form of fragmented globalisation.
What is near-shoring?
In the context of globalization, near-shoring refers to the practice of relocating business operations or outsourcing services to a nearby country or region, typically with the aim of reducing costs while maintaining proximity to the home country. This is in contrast to offshoring, which involves moving operations or services to a distant location, often in a different time zone, in order to take advantage of lower labor costs.
Near-shoring can provide several advantages, such as lower transportation costs, similar time zones, cultural similarities, and easier communication and collaboration. Additionally, near-shoring can help companies comply with local regulations and reduce risks associated with political instability, natural disasters, or supply chain disruptions.
Near-shoring has become an increasingly popular strategy for companies in industries such as manufacturing, IT, and customer service. For example, a company based in the United States may choose to near-shore operations to Mexico or Canada, while a European company may near-shore to Eastern Europe or the Mediterranean region.