By: Hector Torres (Center for International Governance Innovation)
Geopolitical tensions have exposed the risk of over-reliance on certain markets. Liberal democracies are reassessing whether free trade should be replaced by what US Treasury Secretary Janet Yellen has called “resilient trade.” This is defined as a form of trade where international value chains rely on “friendly” suppliers (read: not China).
Champions of this new trade architecture are not questioning David Ricardo’s comparative advantage theory. They continue to believe in the benefits of trade liberalization, but more so if it takes place among “friends.”
In their world, free trade is good but “friendshoring” is safer. Comparative advantages still count, but rather than chasing the cheapest suppliers, companies should factor in longer-term risks such as geopolitics, security and overconcentration in supply chains.
Governments, friendshoring advocates say, should play a critical role in strengthening national economic resilience by guiding private companies toward reliable comparative advantages. How can they do that?
Friendshoring proponents are not very specific on how governments should choose friends and whether friends can trade with other friends’ foes. But biases toward friends must be embodied in preferential trade agreements. Nor do advocates of the approach see a conflict with trade’s multilateral architecture. According to them, moving supply chains to like-minded countries can be done through a broad array of “multilateral engagements.”
This is peculiar. Friendshoring is not a multilateral engagement, as this is commonly understood, since only friends are invited to sit at the negotiating table…
Featured News
Judge Mehta Questions Both Sides in Landmark Google Antitrust Case
May 2, 2024 by
CPI
FCC Urges Urgent Funding for Removal of Chinese Telecom Equipment from U.S. Networks
May 2, 2024 by
CPI
Former Pioneer CEO Facing Potential Criminal Charges For Colluding With OPEC
May 2, 2024 by
CPI
South Korea’s Antitrust Regulator Greenlights K-Pop Powerhouse Deal
May 2, 2024 by
CPI
Exxon’s Pioneer Purchase Approved, Former CEO Barred from Board
May 2, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI