Evidence suggesting that economic globalisation is going to pause, or re-balance into a more regional/continental stance in the near-to-medium term, continues to mount. Pandemic-related disruptions to production and distribution have hampered industries worldwide for more than a year, causing a mix of temporary and permanent adjustments to trade flows, as well as business location and investment strategies.

Within this context, governments are signalling and executing strategies to domesticate global production. The new US administration, for example, has indicated that previously implemented tariffs on certain industries and goods from China, Canada and elsewhere will not immediately be lifted. Federal ‘Buy American’ procurement directives have also been strengthened. 

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Through executive order, the president Joe Biden has ordered a 100-day supply chain review in strategic sectors related to semiconductors, high-capacity and EV batteries, pharmaceuticals and critical minerals. Often overlooked from this same order are further requirements for sectoral supply chain assessments to be completed for defence, public health, information and communications technologies, energy, transportation and agrifood industries. 

Examples can also be found in both Canada and Mexico, where policies and funding support vaccine-nationalism, Covid recovery, and pro-domestic expansion. The pharmaceutical giant Sanofi Pasteur recently announced that it will build a new $400m influenza vaccine facility in Toronto, with government support, to bolster Canada’s biomanufacturing capacity. And the Mexican central government is eagerly promoting public–private partnerships to stir corporate investment in energy and infrastructure projects with anticipated multiplier effects. 

In some respects, the private sector is leading the legislative and regulatory changes that serve to reinforce global supply chain realignments. In the semiconductor industry, TSMC, the world's largest chip maker, announced plans in March 2021 to spend $36bn on new production capacity in the US — triple its commitment announced just last year. Days later, US-based Intel announced plans to expand US chip fabrication by $20bn, and speculation is that Samsung will soon announce a similar $17bn investment in the US. 

It would seem in some sectors the domestication strategy is blooming. Whether similar success will be found in industries that are more cost-sensitive remains to be seen. While Covid-19 economic recovery plans are in their early stages in most countries, domestic capacity building is more important than ever in a world where economic globalisation has been called into question. We should expect more frequent and vocal expressions of supply chain sovereignty in the coming years.

Gregg Wassmansdorf is a senior managing director, consulting, at Newmark, a global commercial real estate services firm, and also a member of the Site Selectors Guild.

This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.