What can or should be reshored? The case of France

There is a lot of talk of reshoring production after the COVID crisis. In the case of France, should mass reshoring be expected? We do not believe so. For instance: The deterioration in France’s foreign trade has taken place with respect to developed OECD countries and not emerging countries , s o there has not been any abnormal offshoring from France to emerging countries. Rather, France has a cost- and non-cost-competitiveness problem with respect to OECD countries . This reduces the efficiency of reshoring in France; Companies are worried about the fragility of global value chains, with some components being manufactured by an ever-smaller number of subcontractors. This has resulted in a clear trend towards the regionalisation of value chains , but if European value chains are developed, France’s poor competitiveness leaves little hope for major direct investment in France; Production costs are much higher in France than in emerging countries. Reshoring from emerging countries would therefore reduce purchasing power; France’s growth strategy is to rise up the value chain, not to reshore low-end production currently carried out in emerging countries. If only production that is considered strategic by the government is reshored, a slide down the value chain and higher production costs would have to be tolerated, as would the need to permanently subsidise this production; Finally , in many cases there are increasing returns to scale: the larger the volume of production, the more competitive it is. It therefore make s no sense to reshore only a small portion of the country’s (or Europe’s) needs. Altogether, beyond what i s truly strategic and may be permanently subsidised, reshoring should be limited to high-end products (it bears repeating that there has been no abnormal offshoring to emerging countries) in which France is competitive and in which it is possible to attain a sufficient volume of production in order to harness increasing returns to scale. This is unlikely to lead to a long list of candidates for reshor ing .