Background

Stung by shortages of essential products in recent years due to trade disruptions, natural disasters, and the COVID-19 pandemic, and with an eye toward preventing similar disruptions due to potential actions by foreign competitors and adversaries, the U.S. is launching reviews to determine its supply chain vulnerabilities in key sectors. These reviews could ultimately lead to efforts to shift sourcing for products in these sectors.

Under a Feb. 24 executive order, federal agencies will launch an immediate 100-day review of the supply chains of pharmaceuticals and active pharmaceutical ingredients, critical minerals (including rare earth minerals), semiconductors and advanced packaging, and large-capacity batteries (e.g., those used in electric vehicles). This review will identify near-term steps the government can take to address vulnerabilities in the supply chains for these goods.

The EO also directs a more in-depth, one-year review of supply chains in the defense industrial base, the public health and biological preparedness industrial base, the information and communications technology industrial base, the energy sector industrial base, the transportation industrial base, and supply chains for agricultural commodities and food production. These reviews will identify critical goods and materials within these supply chains, the manufacturing or other capabilities needed to produce those materials, locations of key manufacturing and production assets, the availability of substitutes or alternative sources, and the role of transportation systems in supporting supply chains and industrial bases. Agencies will also make specific policy recommendations to address risks as well as proposals for new research and development activities.

President Biden said this effort is aimed at achieving “resilient, diverse, and secure supply chains” that will “help revitalize our domestic manufacturing capacity” and “grow opportunities for American businesses to export their goods that we’re going to be making.” In some cases building resilience will mean “increasing [U.S.] production of certain types of elements,” he said, while in others it will mean “working more closely with our trusted friends and partners, nations that share our values, so that our supply chains can’t be used against us as leverage.”

These comments suggest that if the reviews identify sufficient supply chain risks the White House may launch efforts to relocate production in affected sectors from China and other potentially adversarial countries to the U.S. A Politico article notes that these measures could include invoking the Defense Production Act “to force companies to produce certain goods domestically” or pursuing “worker-training programs to get suppliers to relocate to the U.S. or allies.”

Copyright © 2021 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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