The U.S. and 17 partners announced July 20 their intent to collaborate on efforts to alleviate near-term transportation, logistics, and supply chain disruptions and bottlenecks and to build collective, long-term resilient supply chains. The news came as Treasury Secretary Janet Yellen urged more work to ensure that U.S. supply chains shift more toward friendly countries and minimize reliance on China and other authoritarian regimes. However, it is unclear at this point what policies or practices may be utilized to encourage such changes.
Following their participation in a supply chain ministerial forum, the U.S., Australia, Brazil, Canada, the Democratic Republic of the Congo, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, Singapore, Spain, and the United Kingdom said “the key to resolving the next global supply chain crisis is to prevent it from happening in the first place.” Toward this end they resolved to focus their work on the following principles.
- promoting diversification and increasing global capacities for multiple, reliable, and sustainable sources of materials and inputs, intermediate goods, and finished goods in (as yet unidentified) priority sectors, along with logistics infrastructure capacities (e.g., promoting public and private investment into supply chains in priority sectors and encouraging partnerships and co-investment for access to and development of environmentally and socially responsibly sourced materials and inputs)
- identifying and addressing risks arising from supply dependencies and potential vulnerabilities in critical infrastructure, including working to eliminate corruption in support of supply chain security
- encouraging global sustainability and responsible business conduct across supply chains, including eradicating the use of forced labor, fostering the increased use of recycled materials and product components, and supporting the fair and sustainable manufacturing and trade of products
- promoting predictability, openness, fairness, and nondiscrimination in economic relations as they impact supply chains
- promoting the involvement of small and medium-sized businesses in priority supply chains; the adoption of digital technologies by micro, small, and medium-sized companies; and investments into a broad range of communities
- transparency in consultations with the private sector, civil society, different levels of government, and other relevant stakeholders, including advancing information sharing, common approaches, and early warning systems about potential, emerging, and systematic supply challenges
These anticipated efforts appear to align closely with a call by Secretary Yellen this week for the U.S. to “work with allies and partners through ‘friend-shoring’” to strengthen economic resilience and address the supply chain vulnerabilities revealed and exacerbated by the COVID-19 pandemic, the Russia-Ukraine war, and other factors.
“Friend-shoring is about deepening relationships and diversifying our supply chains with a greater number of trusted trading partners to lower risks for our economy and theirs,” Yellen said in a speech in South Korea. The U.S. recognizes that sufficient quantities of critical goods cannot be made domestically, she said, and is therefore working through the Indo-Pacific Economic Framework, the U.S.-EU Trade and Technology Council, and other regional and bilateral initiatives to “maintain strong economic ties with critical allies … while lessening the risks associated with the over-concentration of key supplies in unreliable countries.” This will help participating economies not only become “more innovative, productive, and resilient,” she noted, but also reduce their susceptibility to efforts by China and other authoritarian regimes to “use their market positions in raw materials, technology, or products to exercise geopolitical leverage or disrupt markets and trading activities for unrelated reasons.”
Copyright © 2022 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.