US optimism to reshore supply chains from Asia ‘overblown’, with region’s share of global exports set to rise

Name: Taiwan’s worst drought in decades adds pressure to global chip shortage
Uploaded: 2021-06-16T16:00:00.000Z
Duration: 3 min 46 s
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Biden administration is keen to loosen supply chain dependence on Asia, especially China, and has established a trade ‘strike force’ to strengthen US production

But The Economist Intelligence Unit says firms and investors will remain deterred by North America’s lack of competitiveness compared to Asian economies

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The Biden administration is keen to address reliance on foreign countries, such as China, and as part of a 100-day inter-agency review ordered in February, confirmed last week in a 255-page White House report that it will set up a “strike force” to fight China’s unfair trade practices and strengthen American supply chains. Photo: AP

Andrew Mullen

Published: 12:00am, 17 Jun 2021Updated: 2:10am, 17 Jun 2021

Asia’s convenience, reliability and cost-effectiveness mean optimism and expectations in the United States that American companies can reshore production from the region is “overblown” and any such shifts will “remain an exception to the rule”, according to a new report.

The Biden administration is keen to loosen US supply chain dependence on foreign countries, especially China, and confirmed last week in a 255-page White House report it plans to set up a “strike force” to fight Beijing’s unfair trade practices and strengthen American production.

But a report from the The Economist Intelligence Unit (EIU), released on Wednesday, said companies and investors will remain deterred by North America’s lack of competitiveness compared to Asian economies.

A number of obstacles will prevent businesses and investors from viewing North America as a realistic production substitute for Asia

The EIU

It also said that lingering protectionism and cross-border tensions within North America will present another obstacle, complicating options for arbitraging production costs throughout the region, with these factors set to discourage the types of investment required to transform North America into a viable, self-sustaining supply-chain ecosystem.

“North America boasts several advantages – including years of economic integration, a large free-trade area, short travel times and new opportunities for policy coordination under [United States-Mexico-Canada Agreement],” said Andrew Viteritti, The EIU’s commerce and regulations lead.

“However, a number of obstacles will prevent businesses and investors from viewing North America as a realistic production substitute for Asia, at least through the medium term.”

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Taiwan’s worst drought in decades adds pressure to global chip shortage

The report noted that of particular relevance was Asia’s more successful mitigation of coronavirus disruptions to production and trade, as well as its established, reliable and low-cost manufacturing capabilities.