Is “Friendshoring” the Future of Canadian Foreign Policy?
Democracies and a Changing International Environment
Russia’s invasion of Ukraine in February ended the decades-long peace in Europe, a change that was unthinkable to many. The Russian invasion has also refocused international attention on Taiwan, and the possibility that China might become emboldened to pursue a similar war. Additionally, tensions with authoritarian regimes have reached the domestic sphere in Canada, with recent reports that China engaged in direct interference in the 2019 federal election. These are just a few examples of an ever-deepening trend of confrontation and tension between liberal democracies and authoritarian regimes.
This increase in hostilities between democracies and autocracies has necessitated foreign policy soul-searching for liberal democracies such as Canada. Liberal democracies, led by the United States, have generally adopted a policy of civility towards authoritarian regimes in recent decades in the hope that economic interconnectedness, normalized diplomatic relations, and cooperation within international institutions would result in liberalization and the expansion of democratic values. Now, it is apparent that there is a need for a new foreign policy to reflect a changed international environment if democracies such as Canada wish to protect their strategic interests.
What is “Friendshoring?”
On October 11, 2022, Deputy Prime Minister of Canada, Chrystia Freeland gave a speech at the Brookings Institute in Washington, D.C. in which she shared the Trudeau government’s vision for an updated and unified foreign policy with Canadian allies for this new era of international politics. As Canada and others confront increasingly powerful and bold authoritarian regimes, Freeland proposed that liberal democracies pursue a policy of “friendshoring.” Her speech echoed the sentiments she expressed in June 2022 during a panel discussion with U.S. Treasury Secretary Janet Yellen, another advocate of the friendshoring policy.
Friendshoring is a strategy that is reminiscent of ‘reshoring,’ which refers to the policy of manufacturing domestically, and ‘nearshoring,’ which refers to the policy of manufacturing as geographically close to one’s own country as possible. Friendshoring on the other hand involves a concerted effort amongst allies to build their strongest economic ties and supply chains with each other. To implement the friendshoring policy, a country must develop or minimize economic ties with other countries based on whether they are an ally or otherwise share one's own values. Friendshoring is therefore distinct from the simple protectionism of reshoring and the geographical considerations of nearshoring. Freeland proposes undertaking this economic project through various tax credits and trade deals that incentivize consumer behaviour that favours allied liberal democracies.
Why Friendshoring?
Freeland asserts that friendshoring would prevent liberal democracies from enriching the very regimes that threaten their existence and security. Additionally, friendshoring would make democracies largely impervious to economic coercion from hostile regimes, because if supply chains have been built with allies, an authoritarian regime would not be able to withhold a vital product or resource such as rare earth minerals, natural gas or semiconductors in order to advance a strategic interest.
Furthermore, Freeland claims that these policies will be positive for Canadian workers and workers from other liberal democracies that pursue the policy, as they will no longer be in competition with workers abroad whose countries do not provide reasonable rights and fair compensation.
Risks and Limitations
Friendshoring as presented by Freeland and Yellen is a compelling picture, but several questions remain.
Firstly, will this policy be effective from a geopolitical standpoint in undermining the power of authoritarian regimes? The answer is complicated. Implementation of friendshoring will involve an arduous process of building and strengthening new supply chains and this will take time. It will also be an effort that must be undertaken carefully in order to prevent retaliation from autocracies on which liberal democracies are still dependent economically. It would therefore be unreasonable to expect friendshoring to undermine any authoritarian regimes in the near term. Within the Russia-Ukraine conflict, friendshoring is again unlikely to make a significant difference, as Canada and other liberal democracies have already imposed stringent sanctions on Russia which have, as of now, not stopped the invasion. Friendshoring will likely be a more effective strategy in countering China and other regimes over the long term.
The second issue is the likely increase in prices of consumer goods that would accompany friendshoring. If Canada and other liberal democracies seek to trade primarily with each other, this will limit imports from many countries where cheap labour and limited business regulation have allowed vast numbers of products to be manufactured and sold to consumers at low prices. Thus, moving manufacturing to liberal democracies will inevitably increase the prices of products. If Canada and others are wealthier, as Freeland suggests they will be, paying more for consumer goods will be possible, however, particularly in the midst of inflation, even higher prices for goods will hurt those who are already struggling the most in Canada and other countries. Higher prices on everyday items will also potentially threaten the popularity and viability of the policy within democratic countries. These are possible consequences that must be mitigated if friendshoring is to be implemented successfully.