‘For several years at least, there have been lively debates on nearshoring, or the shortening of supply chains, and on reshoring, i.e. the relocation of production facilities back to home countries. We are witnessing a shift from mere discussions to globalisation changes gaining momentum. 2020 and 2021 saw a reversal of the 20-year trend regarding the location of greenfield investment, with more such investments located in developed countries. In 2021, the value was USD 142 billion higher than in developing countries. Russia’s invasion of Ukraine marked the end of the current model of globalisation. Countries and businesses have been considering friendshoring, or the transfer of production to groups of countries with similar values. Friendshoring is also increasingly attractive due to rising production costs in countries such as China, with unit labour costs 285 per cent higher than two decades ago’, says Marek Wąsiński, the head of the world economy team at the Polish Economic Institute.

The US–China trade war, the pandemic and Russian aggression have been changing globalisation

It began with the trade dispute between the United States and China, leading to changes in the functioning of supply chains in sectors affected by additional tariffs. Next, the COVID-19 pandemic shook the production network’s stability: lockdowns led to delays in deliveries, product shortages. Subsequently, maritime transport could not keep up with the economic recovery and the prices observed increased as much as tenfold.

Russian aggression has added political security, which goes far beyond Eastern Europe, as a major consideration to investment calculations. It can be seen as the symbolic start of a period in which economic resilience will be a priority.

It is also reflected in the fact that the Savills Nearshoring Index, evaluating the attractiveness of production locations, ranked seven European countries among the top ten performers. Those were as follows: the Czech Republic, Portugal, Austria, the United Kingdom, Finland, Sweden and Poland.

It is of key importance for the EU to become independent of imported energy commodities

A strong catalyst for changes towards friendshoring could be the energy crisis that Europe will experience as a result of its overdependence on energy imports.

‘The EU has been dependent on Russian fossil fuels for too long and the Russian invasion of Ukraine will force the acceleration of the energy transition. But the transition is a process related to the availability of critical raw materials. To build a 1 MW offshore wind farm, more than 15 tonnes of them are needed – nearly 9 times more than for a gas-fired power plant and over 6 times more than for a coal-fired power plant. In the case of wind farms and photovoltaics, the most consumed materials are copper, zinc and silicon. Nuclear energy is also characterised by higher demand for critical raw materials than conventional power plants. Considering that for 11 of the 30 critical raw materials the EU’s dependence on imports exceeds 85 per cent, securing supplies of those raw materials will be a major challenge’, says Magdalena Maj, the head of the climate and energy team at the Polish Economic Institute.

At the same time, the identification of the largest dependencies shows that 8 per cent of EU imports are exposed to a small number of suppliers and the EU’s low production potential. More than half of the products concern four key ecosystems: electronics, health, energy-intensive sectors and RES. Those should be the priority areas for the EU’s diversification and reshoring activities to focus on.