Supply and demand shocks from the Covid-19 pandemic, the intensification of rivalry between the United States and China, and the Russian invasion and ongoing war in Ukraine have further heightened geopolitical tensions in recent years. Reaction to these shocks has resulted in a new policy of ‘friend-shoring’ designed to increase economic resilience and reduce the vulnerability of supply chains. There are, however, serious questions around how effective the new policy will be at achieving these objectives. This Policy Brief discusses the concerns about the potential of ‘friend-shoring’ to negatively affect world trade and welfare, retarding development prospects and exacerbating simmering tensions by fragmenting the world economy and reducing the legitimacy of the multilateral trading system. It advances recommendations that G20 policymakers may consider towards increasing resilience and minimising vulnerability of supply chains, without resorting to fragmentation policies.
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