Unveiling Growth in Nearshoring Regions

During recent new challenges, like economic crises, the global pandemic, Ukraine-Russia and Middle East conflicts, Global Value Chains (GVCs) have shown their fragility and vulnerability, prompting authorities to advocate nearshoring for greater security and efficiency. Nearshoring, defined in this paper at the macroeconomic level as a production process of a region which uses again a greater share of foreign inputs produced by neighboring EU regions, appears to be an effective process for preserving the benefits of global production while simultaneously reducing the risks of supply chain disruptions inherent to long-distance offshoring. However, understanding its macroeconomic impact is complex, especially at the regional level. Thanks to an operational definition of nearshoring regions, the study identifies nearshoring regions in Europe and examines the growth premium that these regions gain from this form of GVCs reorganisation using interregional IO trade data. Results are clear. Benefits in terms of growth only arise in those nearshoring regions able to impose favorable terms-of-trade, through command-and-control functions. The geographical selectivity of growth premium from nearshoring risks to exacerbate interregional inequalities.