![file_icon](images/file_icon.png)
Published Date: 2024-08-21
Publication:2023.12
Principal Investigator:顏慧欣Yen, Huai-Shing
Researchers:蘇怡文Su, Yi-Wen、許裕佳Hsu, Yu-Chia、聶廷榛、黃禾田、林卓元、羅婉甄、蔡晴雯
1. The
U.S. is collaborating with Vietnam and Mexico to bolster supply chains in the
fields of semiconductors, critical mineral deposits, clean energy, and
healthcare.
On September 10th of
this year, the United States officially elevated its relationship with Vietnam
to a “comprehensive strategic partnership,” while initiating the “North
American Leaders’ Summit” and the “U.S.-Mexico High-Level Economic Dialogue”
with Mexico. The United States plans to enhance supply chain cooperation with
Vietnam and Mexico in semiconductors, critical minerals, clean energy, and
healthcare. Vietnam was chosen by the United States for friendshoring primarily
due to due to considerations such as its geostrategic importance, low cost of
living, abundant labor force and natural resources, as well as Vietnam’s
participation in many important FTAs. Additionally, the Vietnamese government
provides several investment incentives, such as tax exemptions, subsidies on
loan interest, budget allocations for mineral development, and assistance in
obtaining international financing to support Vietnam’s green transformation.
Mexico was chosen by the United States for friendshoring due to the market access
under the bilateral FTA, which contribute to expanding U.S. influence in
Central and South America, as well as Mexico’s abundant natural resources and
labor force. Furthermore, the Mexican government invests in developing
industrial parks, establishing railway connections to industrial parks and
seaports, and providing favorable tax incentives. The U.S.’s cooperation with
Vietnam and Mexico involves investment in constructing factories, talent
training, technical cooperation, and forming expert groups. The collaboration
is often initiated by the United States by providing funding or expertise to
assist in local resource development and talent training, thus fulfilling the
needs of both parties.
2. South Korea’s Recent Embrace of Diversification in
Overseas Expansion: Positive Response to U.S. Friendshoring Policy, Limited
Impact on Relocation Decisions from China.
In recent years, South
Korea has diversified its approach to overseas expansion. Key strategies
include: (1) shifting labor-intensive industries to Southeast Asia and India,
where costs are more competitive than in China; (2) for businesses targeting
the Chinese market, adopting an "in China, for China" strategy; (3)
for high-tech industries like advanced semiconductors, reducing or withdrawing
operations in China, or halting investments in compliance with U.S. sanctions;
and (4) implementing a “China+1” or “China+N” strategy in areas with strong
production and sales in China.
Despite the U.S.
friendshoring policy has already influenced South Korean companies’ outbound
investments, it is still too early to assess its effectiveness. To mitigate the
impact of the U.S. friendshoring policy on corporate interests, South Korea
communicates with the U.S. through channels such as bilateral summits, sending
delegations to the U.S., and individual companies directly negotiating with the
U.S. Due to their significant influence over domestic economic and trade
policies, South Korean companies are highly involved in the negotiations. Although
friend-shoring has had an impact on South Korean companies’ withdrawal from
China, the effect is likely limited. Currently, South Korean companies’
strategies are to comply with U.S. policy requirements while maintaining their
existing scale and promoting technological advancement. Unless the U.S.
continues to intensify restrictions on corporate activities in China, it is
expected that South Korean semiconductor companies will continue to adopt the “China+1”
or “China+N” strategy.
3. Considering
that friendshoring has become a factor influencing business operations, it’s
important to keep an eye on its progress.
Regardless of
friendshoring, nearshoring, or reshoring policies, it is widely observed that
these policies have become a priority strategy for enterprises to mitigate
risks, even surpassing considerations of cost efficiency and budget reduction. Friendshoring
and trade concentration reflect a shift in countries' trade preferences towards
those with similar geopolitical stances, rather than prioritizing
specialization and comparative advantage. The ongoing Russia-Ukraine conflict
and deteriorating US-China relations are significant factors driving bilateral
trade relationships towards such political alliances. The World Trade Organization(WTO)
has also warned of increasing fragmentation in global trade in the future,
leading to the emergence of new regional trade blocs.
4.
Although the U.S. friend-shoring policy has led to some changes for supply chains,
it is still in its early stage of development.
Observing the
implementation effects of the U.S. friendshoring policy in Vietnam and Mexico,
it’s noted that US imports from Vietnam have rapidly increased since 2018.
Among them, the proportion of electrical machinery and equipment and parts
(HS85) has significantly risen. Additionally, US investments in Vietnam saw a
significant growth in 2022. Furthermore, Vietnam's exports of semiconductors
and energy to the US have been noticeably growing since 2018. Key mineral
resources also experienced slight growth. Simultaneously, Vietnam's overall
foreign investments have increasingly concentrated on manufacturing,
electricity, gas, and air conditioning supply sectors since 2021. As the US
diversifies its sources away from China for products and expands investments
into Vietnam, including in certain electrical machinery and equipment,
semiconductors, and critical mineral resources, changes in trade structures and
foreign investments indeed indicate a correlation between supply chain relocation
and export growth.
The overall proportion
of U.S. imports from Mexico experienced a significant increase in 2021.
Subsequently, in 2023, Mexico supplanted China as the United States' largest
trading partner. Mexico's exports to the U.S., spanning semiconductors,
critical minerals, and pharmaceuticals, have continued their upward trajectory.
Energy exports to the U.S. also saw a resurgence after 2020. However, over the
past two years, foreign investment in Mexico has not shown a substantial
increase in proportion compared to the pre-friendshoring period. While
manufacturing remains the primary focus of foreign investment in Mexico, there
has been a noticeable uptick in investment across mining, information
technology, transportation, warehousing, as well as financial and insurance
services. Given that transportation, warehousing, and financial sectors are
auxiliary service industries that typically support local manufacturing
activities, particularly in the post-pandemic era where companies have
transitioned from “just in time” production to “just in case” production and
inventory management, there has been an expansion in the scale of warehousing,
logistics, and transportation. This can be interpreted as both a risk
management strategy for enterprises in the post-pandemic era and an indirect
indication of increased manufacturing activities in Mexico, leading to a
heightened demand for auxiliary services. Nonetheless, further observation is
required to validate this trend.
It is widely believed
that countries with competitive labor costs, a geopolitically favorable stance
towards developed countries like the U.S. and Europe, and geostrategic
locations or advantages would be the primary beneficiaries under friendshoring
policies. Presently, countries such as Malaysia, Thailand, Vietnam, India, and
Mexico are regarded among them. However, these countries may not necessarily
possess adequate manpower and technical capabilities. Therefore, the ability of
these countries to address manpower and technical issues through automation and
mechanization equipment upgrades is crucial for the successful implementation
of friendshoring policies. This aspect warrants ongoing observation.
5. Chinese
companies’ export to the United States through countries engaged in U.S. friendshoring
policy, serves as a factor affecting the effectiveness of friendshoring.
Given that
"de-risking" towards China has become the consensus among Western
countries and the G7, it’s observable that the level of trade dependency on
China is beginning to decline across various nations. However, the relocation
of global supply chains out of China at this juncture may also involve Chinese
companies’ strategic repositioning in countries participating in “friendshoring.”
It’s conceivable that Chinese firms, through investments in these nations,
might reroute their exports to the United States via Southeast Asian countries.
In recent times, Chinese companies has often engaged in minor processing and
assembly activities in third countries such as Cambodia, Malaysia, Thailand,
and Vietnam to circumvent the trade remedy measures implemented by the United
States against China, including anti-dumping duties, countervailing duties,
Section 301 tariffs, or Section 232 tariffs on aluminum and steel. Therefore,
it’s expected that China will continue to seek alternative avenues to enter the
markets of the United States and Europe through investments in third countries.
Following this, besides closely monitoring and analyzing such investment
activities, Taiwanese businesses should also exercise caution when investing in
third countries. Due to a perception that Taiwan’s economic ties with China are
relatively close, Taiwan faces the risk of being implicated.