Biden Orders Review to Shore Up Supply Chain
February 25, 2021
President Joe Biden signed an executive order on
Wednesday to formally order a 100-day government review of global
supply chains and potential U.S. vulnerabilities in key industries
including computer chips, electric vehicle batteries,
pharmaceuticals and critical minerals used in electronics.
“We shouldn't have to rely on a foreign country, especially one that
doesn't share interests or values, in order to protect and provide
our people during a national emergency,” Biden said.
The order aims to avoid repeating the severe lack of personal
protective gear such as face masks and gloves that the country
experienced during the early months of the coronavirus pandemic last
year. It comes as American automakers grapple with a shortage of
semiconductors, critical elements in navigation and entertainment
systems in modern vehicles.
"The COVID-19 pandemic has underlined the need for resilient supply
chains and robust domestic manufacturing, so all Americans have
access to essential goods and services in times of crisis," White
House press secretary Jen Psaki told reporters on Thursday.
On top of the 100-day review of the four key industries, Biden’s
order will also direct yearlong reviews for six sectors: defense,
public health, information technology, transportation, energy and
Biden said his administration will implement the recommendations as
soon as they are available. “We're not going to wait for the review
to be completed before we start closing the existing gaps,” he said.
According to a senior administration official, the reviews will be
modeled after the Defense Department’s process to evaluate and
strengthen the defense industrial base and may include the
president’s invocation of the Defense Production Act or other
financial incentives. The DPA is the primary source of presidential
authorities to expedite and expand the supply of materials and
services from the U.S. industrial base needed to promote national
Supply chain experts welcome the administration’s move.
“We could talk about buying American all we want but if we have not
ensured the supply chain is functioning, we're going to continue to
have shortages and stock outs,” said Nada Sanders, a professor of
supply chain management at Northeastern University.
While most of the work to ensure supply chains are resilient happens
at the firm level, federal support to look at the problem
holistically is seen as critical to help U.S. companies to invest
strategically and become more agile at reacting to fluctuations of
supply and demand in times of crisis.
“The key is particularly with dramatic change or rapid change,
you've got to do a good job of forecasting and you got to think
holistically, you got to look at the entire sort of lifecycle of the
operation,” said Scott Miller, senior adviser on the global economy
at the Center for Strategic and International Studies.
The Trump administration also pushed for investment in shoring up
supply chains, mostly through tax cuts incentivizing businesses to
bring manufacturing back to the U.S. In April 2020, then President
Donald Trump invoked the Defense Production Act to clear up
supply-chain issues encountered in the manufacturing of ventilators
and production of N95 face masks.
Officials said Biden’s strategy to protect the supply chain is
different than Trump’s protectionist approach. “This work will not
be about America going it alone,” said Sameera Fazili, Deputy
Director of the National Economic Council in a briefing to reporters
“We are committed to working with partners and allies to reduce the
Biden’s executive order will not mention any particular country and
look at U.S. reliance on foreign suppliers overall.
“One of the vulnerabilities we are looking at is where we might be
excessively dependent on competitors in Asia, obviously including
China,” the senior administration official said.
The U.S. is dependent on China in a range of critical industries
from pharmaceuticals to defense, in part because American firms rely
on cheap Chinese exports.
“The corporate quest over the past 25 years to cut supplier costs,
with insufficient concern for resilience, has saddled the nation
with gaping strategic vulnerabilities in the supply chains for
certain critical materials, medications and technology inputs,” said
authors of a 2020 study by the Center for Energy Studies at Rice
University and the U.S. Naval War College’s China Maritime Studies
Being dependent on an adversary is not a good spot to be in said
Northeastern University’s Sanders. “Having said that, this policy
really looks at a really broad picture in terms of U.S. production,
manufacturing, economy," she added. "So, it's not just China.”
China is reportedly looking into curbing exports of rare earth
minerals that are crucial to U.S. defense contractors that
manufacture military weaponry.
"The government wants to know if the U.S. may have trouble making
F-35 fighter jets if China imposes an export ban," said a Chinese
government adviser as reported by the Financial Times last week.
China is the world’s dominant producer of rare earths, a group of 17
minerals used in electric vehicles, consumer electronics and
“While we call them rare earths as a share of the Earth's crust,
they're not particularly rare,” said Miller pointing to a U.S.
Geological Survey report of American states that have rare earth
Althaus, CEO of USA Rare Earth, a company developing a U.S.-based
supply chain for the minerals, is lobbying the government to expand
domestic mining and processing.
“There is already surging demand for lithium and EV battery
materials, and U.S. manufacturers will need new sustainable supply
to meet near term goals this decade,” Althaus said.
In China and other countries with less-stringent environmental
standards, rare earth minerals are processed using toxic chemicals
and produce air emissions that contain harmful elements, such as
fluorine and sulfur, and wastewater that contains excessive acid and
radioactive materials. U.S. processors say they can adhere to
American environmental safeguards.
Despite the significant environmental concerns, Miller said the U.S.
should look into expanding this sector, particularly if there is a
national security need.
“There's activity in this space,” Miller said. “The question is ...
what's [the federal government's] role in accelerating or
stabilizing the market?”