Hello Alan,
Just enjoyed reading your piece on Friendshoring. It is, of course, a topic or strategy just littered with potential squabbles. No doubt. But let me pose the question in a bit different way. Take the decisions of Germany and other European countries to become highly dependent on Russian gas. From where we stand today, that looks like a disastrous decision. Sure, maybe the Germans got cheaper energy for a while, but ultimate cost is going to be very high. Maybe instead of speaking of friendshoring, we should talk of opponentnonshoring. It seems to me that it is just not smart in the long run to become highly reliant on countries whose values, regimes, and politics are so inimical to one’s own. Sure, it may be a little complicated to administer, but in wartimes we seem to be able to do it. Why not try to avoid wars by doing it ahead of time. Putin would not have invaded Ukraine if the EU countries had not been so dependent on Russian for critical inputs.
My second point has to do with the uncounted costs of trade. Shipping by air and by sea accounts for about 14 percent of global greenhouse gas emissions. Those costs are never counted in the actual profit and loss statements. For example, Chinese steel is produced largely by using coal generated energy. Then the steel is shipped on oil generated energy in ships. The total greenhouse gas cost of importing Chinese steel into the U.S. or EU is quite high. If that cost were included in the P&L statement, it is likely that steel made in the U.S. or EU would be cheaper. But our present costing systems do not count the greenhouse gas cost.
Finally, while we may not be in a shooting war with China, it is clear that Beijing is trying to become as self-sufficient as possible and that it uses informal trade measures to punish countries like Australia, Norway and many others who seem not to please Beijing with their speech and actions. Becoming or remaining highly dependent on China does not seem to offer a good economic future if you believe in free speech and rule of law.
So, I hope you will reconsider a bit and think about how we should go about friendshoring as a practical matter.
Best wishes, Clyde Prestowitz
The Financial Times, August 2, 2022