North America will not see significant supply chain reshoring in the next few years, despite policymakers’ optimistic outlook for developing a more self-sustaining supply chain, according to a report from The Economist Intelligence Unit (EIU), released earlier this month.
The EIU researchers say expectations for developing a North American alternative to Asia-based supply chains are overblown, citing competitiveness and lingering cross-border tensions within North America as key roadblocks to change. The research points to Asia’s “more successful mitigation of coronavirus disruptions to production and trade,” as well as the region’s establishment as a reliable and low-cost manufacturing center as reasons reshoring efforts will fall short.
At least for the next few years, the EIU expects little supply chain change.
“We forecast that Asia’s share of global exports will continue to rise in 2021-25, reflecting the region’s sustained importance in global supply-chain networks, while North America’s share will remain unchanged,” the researchers wrote.
Protectionism and cross-border tensions are expected to persist and remain an impediment to change, they added, citing policy differences in the change from the Trump to the Biden administration.
“Mr Biden has gone to great lengths to signal that the U.S. ‘is back’ as an international partner, eschewing the ‘America First’ strategy of his predecessor, Donald Trump,” Andrew Viteritti, the EIU’s commerce and regulations lead, said in a statement announcing the report. “However, it is still not clear how Mr. Biden will reconcile this approach with his goal of revitalising U.S. manufacturing and jobs.”
Viteritti added that rifts remain in the US-Canada relationship, including over lingering U.S. tariffs and potential exemptions to President Biden’s new “Buy American” rules. There also are concerns over the rise of nationalist and statist policies in Mexico, which are compromising that country’s potential to serve as a cost-effective production hub for North America, according to the research.
See the EIU website for the full report.