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Newly Ordered Defense Supply Chain Review Could Foreshadow More Trade Probes

Thursday, July 27, 2017
Sandler, Travis & Rosenberg Trade Report

President Trump has issued an executive order directing the Department of Commerce to aid in an investigation of U.S. manufacturing capacity, defense industrial base, and supply chain resiliency. Although administration officials said this effort is unrelated to the Section 232 national security investigation currently underway for steel and aluminum, there is some speculation that it could lead to similar probes, and ultimately import restrictions, on other goods.

The order does not specifically mention international trade but does appear to favor U.S. production of goods critical to national security. While it is critical for the U.S. to “maintain a manufacturing and defense industrial base and supply chains capable of manufacturing or supplying” such goods, the order states, modern supply chains are often long and the ability of the U.S. to manufacture or obtain such goods “could be hampered by an inability to obtain various essential components, which themselves may not be directly related to national security.” The order also laments “the loss of more than 60,000 American factories, key companies, and almost 5 million manufacturing jobs since 2000,” which administration officials have frequently blamed on international trade, as undermining the ability of U.S. manufacturers to meet national defense requirements.

The order thus directs the Defense Department to lead an investigation and submit within 270 days a report that does the following.

- identifies the military and civilian materiel, raw materials, and other goods that are essential to national security

- identifies the manufacturing capabilities essential to producing such goods, including emerging capabilities

- identifies the defense, intelligence, homeland, economic, natural, geopolitical, or other contingencies that may disrupt, strain, compromise, or eliminate the supply chains of such goods and that are sufficiently likely to arise so as to require reasonable preparation for their occurrence

- assesses the resiliency and capacity of the U.S. manufacturing and defense industrial base and supply chains to support national security needs upon the occurrence of the identified contingencies (e.g., exclusive or dominant supply of the goods by or through nations that are or are likely to become unfriendly or unstable)

- identifies the causes of any aspect of the defense industrial base or national security-related supply chains assessed as deficient

- recommends such legislative, regulatory, and policy changes or actions deemed appropriate based upon a reasoned assessment that the benefits outweigh the costs

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