US Treasury Secretary Janet L Yellen on Friday pitched ‘friendshoring’ strategy to India, seeking to align trade and investment within a group of countries with shared values, in an apparent attempt to cut the role of China.
In her first visit to India as Secretary of the Treasury, Yellen termed India as an “indispensable partner to the US” and called for further strengthening trade and investment between the two nations.
“Deepening our bilateral ties will reap significant economic benefits for both of our nations,” she said at the US-India Businesses and Investment Opportunities event here.
Stating that the bilateral trade between the two nations reached an all-time high of over USD 150 billion in 2021, Yellen said the recent disruptions caused by the pandemic and Russia’s war in Ukraine are reasons to further deepen economic times.
“India is one of our trusted trading partners,” she said. “In a world where supply chain vulnerabilities can impose heavy costs, we believe it’s important to strengthen our trade ties with India and the large number of countries that share our approach to economic relations.” This strategy is called ‘friendshoring’, she said, adding the idea is to diversify the supply chain away from risky countries like Russia that seek to weaponise trade integration to advance their geopolitical aims.
The Biden administration’s idea of friendshoring or allyshoring aims at manufacturing and sourcing components and raw materials within a group of like-minded countries.
“Modernising our trade relationships in this way will pay dividends,” she said and went on to highlight plans by US-based firm First Solar Inc to build a manufacturing facility in Tamil Nadu, Apple Inc’s plans to shift some iPhone manufacturing from China to India and American toy conglomerate Hasbro moving manufacturing from China to India and Vietnam.
India, she said, is one of the fastest-growing major economies in the world and “is an indispensable partner to the United States.” Earlier in the day, speaking at an event at Microsoft Inc’s facility just outside the national capital, she said US and India are natural allies who can show the rest of the world that democracies can deliver for their citizens despite volatility and war.
“For too long, countries around the world have been overly dependent on risky countries or a single source for critical inputs,” she said. “We are proactively deepening economic integration with trusted trading partners like India.” The US in its new ‘friendshoring’ approach is diversifying away from countries that present geopolitical and security risks to our supply chain, she said.
“Our strategy will also create redundancies in our supply chain to mitigate over-concentration risks. And we are also addressing our reliance on manufacturers whose approaches clash with our human rights values.” Many western companies that embraced offshoring — cutting costs by shifting manufacturing or certain processes to countries with cheaper labour — have been encouraged by tariffs and pandemic supply chain disruption to bring production back to their home country — a trend known as onshoring or reshoring.
But countries like the US cannot make, mine or manufacture everything themselves and so it is now favouring strategic allies when building a supply chain.
“To be very clear, friendshoring is not limited to an exclusive club of countries. We seek integration with the large group of countries that we can count on – developing countries and advanced economies alike,” she said. “In fact, part of our ‘friendshoring’ approach involves partnering with developing countries to grow local industries and connect them to the global supply chain.” Calling Russia’s war in Ukraine “barbaric”, she said challenges faced today are bringing the United States and India closer together than ever before.
“The trajectory of the global economy will be shaped by the work that India and the United States undertake together,” she said. “The same is true for the prosperity and security of the Indo-Pacific.” As a leading developing country and the world’s largest economy, the two nations have great opportunity and responsibility to make progress on the world’s most intractable problems.
The US-India “ties are stronger than ever before,” she said.
While the US is home to the largest Indian diaspora outside of Asia and serves as its largest export market, bilateral trade between the two countries reached an all-time high last year and is expected to grow further in the years to come.
“In the Indo-Pacific region, our shared objective is to advance prosperity and maintain peace and security. India and the United States remain committed to upholding the rules-based international order,” she said. “We are working with our allies and partners to tackle global challenges through the Quad and the Indo-Pacific Economic Framework.” On India assuming the G20 presidency, Yellen said a successful Indian presidency is indispensable to global economic recovery and sustained progress on deepest problems.
The G20, she said, must do better to provide debt relief where necessary.
India’s G20 year is a chance to accelerate global coordination on debt restructuring, she said, adding two years back a Common Framework established in G20 to bring all the major bilateral creditors together to coordinate timely and orderly debt relief for low-income countries could not deliver largely because of lack of cooperation from China.
“As a consequence, debtor countries in need are hesitant to request Common Framework treatment. This needs to change. All major bilateral creditors, including China, must cooperate constructively to deliver on their G20 commitment to provide meaningful debt relief. We must also improve the speed and predictability of the Common Framework itself,” she said.
On climate action, Yellen said the US and India — the world’s second and third-largest emitters — have a shared interest and responsibility to reduce greenhouse gas emissions. “A global challenge like climate cannot be solved by any one country. It requires all of us to work together.” “We live in difficult and complicated times. We face urgent problems that require concerted and collective action,” she said. “The work of our two countries has never been more vital.”
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