Structural Consequences of Policy-Based Interventions on the Global Supply Chain Network

TL;DR

This paper analyzes how policy interventions like Friendshoring, Country Plus One, and Reshoring impact the structure and resilience of the global electric vehicle supply chain network amid geopolitical tensions.

Contribution

It provides a novel network analysis of policy effects on international trade, highlighting industry-specific impacts and unexpected outcomes such as increased globalization under Friendshoring.

Findings

Friendshoring increases global supply links, potentially raising transaction costs.

Country Plus One enhances network density with redundant links.

Reshoring poses challenges due to irreplaceable products in the EV sector.

Abstract

As global political tensions rise and the anticipation of additional tariffs from the United States on international trade increases, the issues of economic independence and supply chain resilience become more prominent. The importance of supply chain resilience has been further underscored by disruptions caused by the COVID-19 pandemic and the ongoing war in Ukraine. In light of these challenges, ranging from geopolitical instability to product supply uncertainties, governments are increasingly focused on adopting new trade policies. This study explores the impact of several of these policies on the global electric vehicle (EV) supply chain network, with a particular focus on their effects on country clusters and the broader structure of international trade. Specifically, we analyse three key policies: Country Plus One, Friendshoring, and Reshoring. Our findings show that Friendshoring, contrary to expectations, leads to greater globalisation by increasing the number of supply links across friendly countries, potentially raising transaction costs. The Country Plus One policy similarly enhances network density through redundant links, while the Reshoring policy creates challenges in the EV sector due to the high number of irreplaceable products. Additionally, the effects of these policies vary across industries; for instance, mining goods being less affected in Country Plus One than the Friendshoring policy.