White House Launches Supply Chain Initiatives on Essential Items | Wiley Rein LLP

[co-author: Tawanna Lee]

On June 8, 2021, the White House released its 250-page report “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Growth at Scale” (the report) and a fact sheet titled: “Factsheet backgrounder: Biden-Harris Administration announces creation of Supply Chain Disruption Task Force to address short-term supply chain disruptions ”(backgrounder). The report and fact sheet highlight vulnerabilities in critical supply chains in the United States and propose a “whole-of-government” approach to address these vulnerabilities.

In the short term, the Administration will establish working groups composed of public and private entities to diagnose existing problems and develop solutions. Long-term goals for the report and the fact sheet generally include increased funding for domestic production and innovation; development of emerging industries; public procurement and research; stricter enforcement of trade; and greater cooperation with foreign allies.

I. Peril and Promise: The Current State of U.S. Supply Chains

The report and fact sheet highlight the growing dependence of the United States on imports of essential items, including the four sectors described in Executive Order 14017: advanced semiconductor and packaging manufacturing, batteries high capacity, critical minerals and materials, and pharmaceuticals and active pharmaceutical ingredients (APIs). For example, these documents note that the United States now produces only 12% of the world’s semiconductors, down from 37% of the world’s production 20 years earlier. Additionally, much of the global large-capacity battery supply chain – including raw material extraction and purification, cell manufacturing, packaging manufacturing, and recycling – has been dominated by People’s Republic of China through significant financial support from the Chinese government to Chinese industries.

In general, the report and fact sheet track vulnerabilities in the supply chain, including insufficient manufacturing capacity in the United States, misaligned incentives in private markets, geographic concentration in the United States. global supply, harmful economic policies in foreign countries and lack of international coordination between the federal government, the private sector, and in some cases foreign allies. In addition, the report notes that unfair trade practices such as the massive subsidization of industries by the Chinese government, as well as unfair labor practices, strongly contribute to the deterioration of these critical supply chains.

Despite the vulnerable state of US supply chains, the administration’s report highlights reasons for optimism about the ability of the United States to boost domestic production. The administration emphasizes that the United States is “well positioned” to rehabilitate vulnerable supply chains with strong research institutes, a skilled and diverse workforce, innovative companies and strong global partnerships. The Authority plans to work closely with industry to improve the health, growth and security of the supply chain through federal incentives, funding and information sharing.

II. Short term: Federal funding for innovative technologies and Supply Chain Disruption Working Group

The Administration’s most immediate action will be to partner with industry participants to address existing shortages. The Administration states in its fact sheet that it will establish a “Supply Chain Disruption Task Force” (the Task Force) to analyze and propose solutions to current vulnerabilities in supply chains. reviews. The Ministries of Trade, Transport and Agriculture will lead the working group and bring together private and public entities with expertise in resolving “bottlenecks and supply constraints”. Specifically, the working group will focus on the residential construction and construction, semiconductor, transportation, agriculture and food sectors, as well as related upstream and downstream sectors. While this task force is largely a response to COVID-19, it will provide private entities with the opportunity to identify pre-existing constraints in these supply chains. The Authority will also begin to aggregate supply and demand data from all federal agencies and make this data available to the public. The fact sheet further calls for the launch of a battery roundtable, led by the Ministry of Energy, to develop a growth strategy for a highly advanced lithium-ion battery supply chain over the years. Next 10 years.

Overall, the Administration’s efforts are focused on improving the coordination of federal agencies, strengthening public-private partnerships, increasing federal government funding for critical industries and R&D (through the through existing loan programs to the Ministries of Energy and Defense, for example, and the creation of new ones under the Development Finance Corporation and the Export-Import Bank), improve opportunities for small businesses and disadvantaged businesses and create highly skilled, well-paying American jobs. Federal funding proposals include more than $ 50 billion for semiconductor R&D investments; $ 20 billion to support the development and deployment of electric vehicles through the Department of Energy; $ 17 billion for critical materials and minerals and battery supply chain facilities; and $ 50 billion to support supply chain resilience through the creation of a dedicated government office.

III. Long-term: tackling the root causes of supply chain disruptions

The report and fact sheet also recognize the role of trade in creating unstable domestic supply chains. In general, the administration identifies subsidies as the main culprit in the degradation of manufacturing in the United States, where foreign governments flood the American market with subsidized products to drive out American competition. The report and fact sheet recommendations include creating a comprehensive review of foreign trade practices affecting critical US supply chains and developing policies to increase the resilience of the supply chain. supply. Unfair trade practices ultimately threaten national security because important sectors are diminished or eliminated and, therefore, the Administration recognizes that such practices must be combated in order to create the sustainability of supply chains.

To this end, the administration calls for the creation of a trade strike force, led by the US Trade Representative (USTR), which will propose unilateral and multilateral coercive measures against unfair foreign trade practices that are eroding critical US industries. . The Administration also announced that it is evaluating a possible Section 232 investigation into imports of neodymium permanent magnets into the United States and their impact on national security, given the heavy reliance on the United States. with regard to imports and the importance of this magnet for motors and other devices used in the defense and civil sectors. Based on the results of this review, it is possible that the Administration may also initiate similar investigations into other products vital to national security.

Other measures focus on the government’s ability to stimulate economic, manufacturing and R&D growth through government procurement authorities under the Buy American Act, federal procurement regulations and practices, and federal grants for scientific and climate R&D. The administration also encourages the Ministry of Labor to provide funds to the Employment and Training Administration to prevent labor shortages in advanced manufacturing.

These measures apply broadly to all sectors, but more detailed and industry-specific plans can be found in the report as well as in the accompanying fact sheet.