Near-shoring Versus Friend-shoring: CGE Analysis of Regional Blocs and Geopolitical Realignment

Global supply chains are gaining popularity, and firms often rely on offshoring as a strategy to gain advantage in the competitive landscape. However, in recent times, they have been vulnerable to disruptions, particularly in the context of COVID-19 and the Russia–Ukraine war. This study aims to analyze the costs and benefits of near-shoring and friend-shoring in two different scenarios. The first scenario models regional trade agreements to analyze near-shoring. For this, two trade agreements—Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership—that predominantly involve the Association of Southeast Asian Nations countries are considered. In the second scenario, a geopolitical perspective is taken up to analyze friend-shoring. The study examines the economic and trade implications of countries that have been aggregated based on political alignment. The findings suggest that near-shoring may be a more effective strategy than friend-shoring, with a broad net positive global impact.