#52 – Inside Our Industry – Rebuilding American’s Economy and Foreign Policy With ‘Ally-Shoring’

Posted on | Inside Our Industry

We have recently learned of a new economic trade term – ally-shoring – and we like it.  Below are excerpts from a Brookings Institute post that details the concept.

Rebuilding American’s Economy and Foreign Policy With ‘Ally-Shoring’
Elaine Dezenski and John C. AustinTuesday  |  Brookings.com  |  June 8, 2021

We…need more domestic production and more of the high-paying jobs that go along with it—but we won’t get there by going it alone. That’s because pivoting supply chains back home is not always realistic; we rely on components and materials from many parts of the world. There is a better way forward, and it starts by selectively leaning into our trade and co-production relationships with friends and allies we trust—what we call “ally-shoring.”

One reason ally-shoring makes so much sense is that in automotive and other industries, we don’t so much engage in “trade” as we make things together with other countries. This is especially true in our auto and mobility sector. Nearly 50% of Midwest states’ so-called “trade” is with Canada, and 30% is with Mexico. Over half of this North American trade and 37% of our trade with allies in the EU is in intermediate goods—meaning component parts of a finished product. This “co-production” reality will be true for electric vehicles as well as other emerging mobility products.

With the disruptions of COVID-19, it is understandable that many of our leaders are proposing the “onshoring” of critical supplies. But as attractive as onshoring sounds, it is not an effective way to win the strategic competition with China. An onshoring push would not only irk our allies but would also be problematic for U.S. companies (including our automakers) who want to keep doing business in foreign markets and using foreign-made component parts in products. It would also be impractical and impossibly costly. With sophisticated, IT-laced products like cars and phones integrating dozens of components from around the globe at the lowest cost possible, no one could afford to buy a solely domestically made one. Even attempting to onshore many supplies would reduce our influence on the world stage. Alliances have benefits too, particularly when in the middle of a global strategic tug of war for primacy between autocratic and democratic political systems.

Ally-shoring is a much better choice. It involves deliberately sourcing essential materials, goods, and services with countries who share our democratic values and commitment to an open, transparent, rules-based international economic and trade regime.

Ally-shoring increases the reliability of critical supply chains while reducing dependence on China and other state actors who will seek to continue to use that dependence to undermine the U.S. Reworking relationships to promote partnership with countries that share our values and interests would reduce our vulnerabilities while maintaining access to a wide variety of goods and markets for U.S. businesses and consumers alike.

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