Nearshoring Boon or Bane

Nearshoring is on the rise, but what does it mean for the global trading system? The World Trade Organization (WTO) released its 2023 World Trade Report, highlighting the importance of trade in reducing poverty and inequality and the risks that fragmentation poses to this progress.

The report also emphasizes the need to strengthen the multilateral trading system (MTS), which has played a major role in promoting global economic growth and development by promoting free trade, reducing trade barriers, creating jobs, fostering economic growth, and creating an environment for businesses to operate and settle trade disputes peacefully.

In addition to re-globalization and strengthening the MTS, the WTO's report also discussed a number of other important topics, including:

The importance of digital trade
The need to address climate change through trade
How trade is impacted by the COVID-19 pandemic and the war in Ukraine
The importance of trade in supporting food security and sustainable agriculture

The report's findings are particularly timely and important considering the current global economic climate, which is characterized by rising inflation, supply chain disruptions, and geopolitical tensions.

The WTO’s World Trade Report 2023 highlights the importance of international trade and cooperation in promoting global economic growth and development. However, the report also acknowledges that the current global economic climate is challenging, and that there is a need for policymakers and business leaders to work together to strengthen the global trading system and ensure it benefits to all.

Nearshoring boom of 2020

The nearshoring boom that emerged in 2020 is one example of how companies adapt to the changing global economic landscape.

In early 2020, COVID-19 disrupted global supply chains and caused a surge in shipping costs and delivery times (Drenik, 2023). This, combined with the increase in global ecommerce and the United States-Mexico-Canada (USMCA) free trade agreement, has led to a significant increase in companies nearshoring their operations to Mexico and Canada. According to the U.S. Census Bureau, in 2021, the U.S. imported $357 billion in goods from Canada and $385 billion in goods from Mexico—both representing the highest level ever recorded.

Nearshoring continues to grow

Nearshoring is a growing trend in the global manufacturing industry. According to a 2022 report by Kearney (2022), 50% of executives interviewed plan on moving operations to North America by 2025. Mexico and Canada are the top two destinations, with 42% and 35% of respondents planning to nearshore to these countries, respectively (Reshoring Institute, 2022).

Nearshoring can help promote trade and economic growth within the North American region. This is because nearshoring involves the movement of goods and services between countries that are close together geographically and culturally, which can lead to lower transportation costs, faster delivery times, and better communication between businesses and suppliers (Deloitte Insights, 2023). Additionally, nearshoring can help create jobs and boost economic growth in both the source and destination countries.

At the same time, nearshoring could also lead to a reduction in trade between North America and other regions of the world. This is because companies that nearshore their operations may be less likely to import goods and services from other countries, potentially leading to a decline in global trade and economic growth.

The impact of nearshoring on re-globalization will depend on several factors, including the specific policies implemented by governments in North America and other countries.

If governments implement policies that support nearshoring in a way that is consistent with the WTO's principles of free trade and non-discrimination, then nearshoring could help promote the WTO's push for re-globalization. However, if governments implement policies that support nearshoring in a way that is protectionist, then nearshoring could hurt the WTO's push for re-globalization.

The connection between nearshoring and sustainability

Although nearshoring offers a number of benefits to businesses, it is important to consider the potential environmental and social impacts of nearshoring before deciding if it’s right for your business.

C.H. Robinson helps companies transition to nearshoring in a sustainable way by providing a variety of services and solutions, including:

Gain advanced visibility through technology: Through our Navisphere^® platform, C.H. Robinson provides companies with real-time visibility to their shipments, which can help identify and optimize global supply chain networks.
Maintain control with managed transportation services: When C.H. Robinson manages your day-to-day supply chain needs, not only can you reduce your carbon footprint by optimizing transportation modes and routes, you can focus on more strategic initiatives.
Measure and reduce carbon emissions: Using Emissions IQ™, our self-serve emissions tool, you can measure and reduce carbon emissions from surface transportation shipments—and take one more step toward achieving your sustainability goals.

Go further with your supply chain sustainability goals

If sustainability improvements are one reason you’re interested in nearshoring, the C.H. Robinson tool, Emissions IQ, can help. It is the first self-serve tool in the industry that gives customers visibility into their Scope 3 emissions across all transportation modes globally. When you know what your emissions are, it’s easier to reduce them. In 2021, Emissions IQ helped customers reduce carbon emissions by 36%.

Emissions IQ is a free, easy-to-use tool that can measure carbon emissions from shipments managed by C.H. Robinson across mode, date, location, and supplier. It can also benchmark your data against previous years and against your industry and identify areas of opportunity to reduce emissions.

We are proud to be a leader in the global supply chain industry and to be working to take advantage of the sustainability opportunities nearshoring offers.

Connect with our team of supply chain experts to discuss your challenges, develop an overall plan, and make an even greater impact for your business.