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May 18, 2020

Will The Coronavirus Pandemic Lead To Reshoring In The United States?

U.S. Trade Representative Robert Lighthizer thinks it could. In a May 11 New York Times op-ed, Ambassador Lighthizer said COVID-19 will “accelerate” re-shoring to the United States because “as companies prepare to reopen their U.S. operations, many have found themselves held hostage to decisions made by foreign governments about whether their suppliers are ‘essential’ or not.”

Lighthizer also said, “Many companies have realized that offshoring creates risks that often outweigh the incremental efficiencies. Long supply lines flow at the whim of local politics, labor unrest and corruption. In some countries, like China, there have been governmentwide efforts to steal intellectual property for the benefit of domestic companies that become the main competitors for the victims of the theft.”

Zhang Xiangchen, China’s ambassador to the World Trade Organization, also weighed in on the question last week.

According to Politico, in an online discussion, he said, “I don’t think even for the big countries, like China and the United States, it can move all the supply chains regarding medical goods back to home. It’s not possible, it’s not efficient, so we have to be realistic. We have to respect economic rules.”

Zhang said it is “sympathetically understandable” that businesses would want to bring supply chains back home, but suggested WTO members should instead strengthen consultations during the crisis and prevent the fragmentation of trade policy.