The ‘Made in USA’ movement just got a new twist with ‘friend-shoring’ or ‘ally-shoring’ becoming the new anthem for the movement. In a recent report by the Biden administration – Building Resilient Supply Chains, Revitalizing American Manufacturing and Fostering Broad-Based Growth – it has been acknowledged that the country cannot meet all production challenges on its own and the support of friendly or allied countries is equally critical in the endeavour.
The concept of ‘ally-shoring’ is a cross breed of onshoring and near shoring and it means going in for economic partnerships with those who share similar values and strategic interests. In the context of the US, countries that are perceived as friendly partners are those that already have tightly wound production and business service networks, such as Canada, Mexico, Costa Rica and American territories like Puerto Rico and Guam.
It is interesting to note that the US already has a strong and long-standing trade agreement – NAFTA- with Canada and Mexico, their immediate neighbours. The main purpose of NAFTA is to eliminate all tariff and non-tariff barriers of trade and investment between the United States, Canada and Mexico. The other mentioned areas – Costa Rica and American territories like Puerto Rico and Guam are having strong trade ties with the US being officially American territories though with independent governance.
In addition, The Dominican Republic-Central America FTA (CAFTA-DR), a free trade agreement between the United States and a group of smaller developing economies – Central American neighbours Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, as well as the Dominican Republic has been signed to promote stronger trade and investment ties, prosperity, and stability throughout the region. It is significant to note that Trade under CAFTA-DR supports ‘Made in America’ jobs and unlocks opportunities for well-paying work as goods flow across borders and are manufactured into final products.
Need for the new shift
America has driven through the chain of production options as per the economic and political need from offshoring-taking production to cheaper destinations to onshoring which is about bringing production and employment back to the country with sub-concepts of near shoring in neighbouring countries for quick deliveries.
The new slogan represents the reality that some crucial materials simply are not available in the US and entering into strategic alliances is a win-win situation not only from an economic perspective for both the countries involved but also is a means to check China’s bid to extend their own authoritarian economic and political model across the globe.
The US administration is confident of ally-shoring picking up as the game plan for growth of American economy as the terminology is more inclusive and represents the new world order where like minded countries need to group together instead of thinking individually.
The Biden administration, giving legitimacy to the term, said working closely with allies is a method of guarding against single-source risk; for example, in the critical minerals supply chain, it is limited in part by where natural resources exist. “Tools including ally- and friend-shoring, and stockpiling, along with investments in sustainable domestic production and processing will all be necessary to strengthen resilience.”
The real question and future development of ally-shoring is dependent on whether the reach of the concept will move beyond neighbouring countries and those that already have trade agreements with other countries like India which enjoy good relations with the US and complement each other in the fashion/apparel industry. For sure collaborating could be a win-win situation for both counties.