Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282557 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10869
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Geo-political tensions and disruptions to global value chains have led policy makers to re-evaluate their approach to globalisation. Many countries are considering friend-shoring – trading primarily with countries sharing similar values – as a way of minimising exposure to weaponisation of trade and securing access to critical inputs. If followed through, this process has the potential to reverse global economic integration of recent decades. This paper estimates the economic costs of friend-shoring using a quantitative model incorporating inter-country inter-industry linkages. The results suggest that friend-shoring may lead to real GDP losses of up to 4.7% of GDP in some economies. Thus, although friend-shoring may provide insurance against extreme disruptions and increase the security of supply of vital inputs, it would come at a substantial cost.
Subjects: 
friend-shoring
regionalisation
global trade and production network
international I-O linkages
JEL: 
F15
F51
F60
R15
Document Type: 
Working Paper
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