Treasury Secretary Janet Yellen embraced a new term for trade policy in arguing the United States and its allies should lean more heavily on one another to protect fragile global supply chains.
Yellen backed the notion of “friend-shoring” Tuesday in a speech at an LG Group research facility in Seoul, South Korea. Friend-shoring builds off the concepts of onshoring or nearshoring, which is when supply chains are moved to, or moved nearer to, the U.S. — as opposed to offshoring.
Yellen envisions the U.S. and its allies working together to share the supply chain burden by collaborating more closely while lessening dependence and coordination with China and other geopolitical adversaries.
“Friend-shoring is about deepening relationships and diversifying our supply chains with a greater number of trusted trading partners. The purpose is to lower risks for our economy and theirs,” she said.
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Yellen cited major supply chain disruptions stemming from the COVID-19 pandemic and the war in Ukraine as proof that a shift in supply chain location and organization is needed.
“Supply chain resilience is a key focus of the Biden-Harris administration. And the necessity of this work has been illustrated clearly by the events of the past two years, first by COVID-19 and our efforts to fight the pandemic and now by Russia’s brutal war of aggression in Ukraine,” Yellen said.
During her speech, Yellen spoke about semiconductors and said China had used unfair trade practices to maintain hegemony in various industries.
“We cannot allow countries like China to use their market position in key raw materials, technologies, or products to disrupt our economy or exercise unwanted geopolitical leverage,” she said.
Yellen also talked about furthering America’s alliance with South Korea and working together to build supply chain resilience. The U.S. and South Korea have long been economic and political allies, and Yellen emphasized the importance of that connection given the increasing need for technology such as semiconductors.
“By working with key allies like Korea to develop stronger supply chains for key components like [electric-vehicle] batteries or semiconductors, we can make both of our economies stronger and help ease the blockages that have led to higher prices and delays for American workers and businesses,” Yellen said.
The globe’s supply chains have been snarled for quite some time after the COVID-19 pandemic wreaked havoc on shipping and logistics. Furthermore, China has added to the woes by pushing its zero-coronavirus policies that entail shutting down mass swaths of society and workplaces in order to contain the virus.
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The situation in Ukraine has also shown that reliance on a single major superpower can be detrimental. Much of Europe relied on Russian energy exports, and many countries are now struggling to decrease their reliance on Moscow. Energy prices, meanwhile, have gone through the roof.
Because of the war in Ukraine and supply chain problems, inflation has become much worse. Inflation accelerated to an excruciating 9.1% for the 12 months ending in June, the highest level in four decades, according to the recently released consumer price index report.
