President Joe Biden is making America’s industrial base a high precedence; since taking the oath of workplace he has issued a Buy American Executive Order and put out his plan to extend the use of the Defense Production Act.
While the purpose of stronger American manufacturing is price pursuing, a Buy American strategy is sadly counterproductive. The Biden administration as an alternative ought to concentrate on reshoring industrial capability — with somewhat assist from our buddies — to bolster our provide chains in areas of biggest want.
Over the previous 50 years, U.S. manufacturing capabilities have declined considerably as the nation transitioned into an information-age economy whereas manufacturing shifted offshore to lower-cost labor markets resembling China. While the international financial system has created nice efficiencies, it has additionally led to harmful industrial base weaknesses.
For instance, U.S. dependence on Chinese companies for personal protective equipment (PPE) and pharmaceutical production got here starkly into focus in the early weeks of the COVID-19 pandemic. The 2017-2018 White House-led review of the protection industrial base additionally recognized important dependencies on Chinese producers for rare-earth processing, microelectronics, small unmanned aerial automobiles and specialty chemical substances. These instances reveal that the U.S. doesn’t have enough home manufacturing capability in essential areas.
Buy American does not solve these problems. For instance, throughout final 12 months’s negotiations over the 2021 National Defense Authorization Act, a Buy American provision that narrowly failed would have required 100% of Defense Dept. main acquisition packages to be manufactured and sourced in the U.S. by 2026.
This blanket strategy isn’t useful. Defense is already certainly one of the nation’s strongest manufacturing sectors because of current legal guidelines and rules; mandating further restrictions would have solely marginal advantages and, extra importantly, wouldn’t tackle the actual challenges in the industrial base. Moreover, why would the Biden administration need to pursue further Buy American laws or regulation, notably when certainly one of its highest priorities is to strengthen ties with allies?
Biden can be higher served specializing in reshoring manufacturing capabilities now primarily based in adversarial nations, principally China. For instance, whereas greater than $40 billion was obligated in direction of pandemic response by September 2020, there may be undoubtedly way more that may be accomplished to safe our public well being provide chain from Chinese vulnerabilities.
Next, the Biden administration wants to obviously articulate its industrial base priorities. For COVID-19 and future pandemic response, the $10 billion focused for Defense Production Act funding in the administration’s COVID stimulus package — an historic quantity — exhibits their intent to speculate. For protection, the Biden staff ought to focus its efforts on particular areas, resembling microelectronics and synthetic intelligence, that pose the biggest danger to national security.
While the Defense Production Act is a crucial instrument, it is very important acknowledge that it isn’t the solely instrument in addressing industrial base shortfalls. Programs resembling Industrial Base Analysis and Sustainment (IBAS), Manufacturing Technology, public-private partnerships resembling the Manufacturing Innovation Institutes (MII), and the National Defense Stockpile are all constructed to deal with each protection and pandemic preparedness challenges. IBAS, for instance, directs certainly one of the uncommon earth processing projects began in 2020 and a new MII launched final 12 months advances sustainable and dependable bio-industrial manufacturing applied sciences
Finally, the Biden administration can reshore with somewhat assist from our buddies. Myriad efforts resembling the National Technology Industrial Base (NTIB), reciprocal protection procurement memorandums of understanding, Security of Supply Agreements, DPA Title III, and even the U.S.-Mexico-Canada Agreement all current nice alternatives for leveraging the respective industrial strengths of America’s shut companions and allies. These haven’t had the affect that they might, however the Biden administration can change that. The NTIB, for instance, has made the U.S., Australia, Canada, and the United Kingdom one industrial base. The U.S. can begin together with NTIB clauses in DPA, IBAS, and different contract alternatives so firms primarily based in allied nations can work to strengthen America’s industrial base.
Moving ahead, all these centered reshoring efforts will assist to strengthen U.S. manufacturing capabilities the place they’re wanted most. Rather than a misguided Buy American strategy, reshoring will create jobs, strengthen America’s industrial base and bolster our worldwide partnerships, which is really a win-win.
Jerry McGinn is govt director of the Center for Government Contracting, School of Business, George Mason University.