Will nearshoring cause the end of globalization?

The ongoing trade war between the US and China, the COVID-19 pandemic, and the Russia-Ukraine war, unfortunately, exposed the weaknesses of the global supply chain. Doing business from one continent to another is more complicated than before. 

This means that the ecological myth of “globalization” — which has sought profits by removing trade barriers and seeking cheaper labor and resources — may be collapsing.

James Zhan, Director of Investment and Enterprises at the United Nations Conference on Trade and Development (UNCTAD), even stated that this decade will likely be “one of transformation for global value chains (GVCs), reshaping the global trade and investment landscape.”

What kind of evolutionary processes are businesses planning to thrive in this changing environment? 

Management consulting firm McKinsey & Company said that 71% of chief procurement officers (CPOs) are planning to increase their nearshoring share by 2025, with 24% considering nearshoring in the same market where it currently operates.

Companies, nowadays, are putting emphasis on consistent delivery no matter how expensive it is instead of cheaply procured labor.

Even the US government seems to be actively participating in the trend of creating this new nearshoring ecosystem, with the Biden administration putting emphasis on Central America and those involved with the CAFTA-DR (Dominican Republic–Central America Free Trade Agreement) deal.

With this in mind, experts are saying that nearshoring may put an end to offshore deals and globalization. 

Read more here.