With growing demands to secure supplies of medical supplies, vital technological and industrial goods, and critical resources such as rare earth minerals, the Biden government is launching a review of global manufacturing supply chains, where public health is of vital importance to business and national security from it. As the world now searches for limited supplies of reliable COVID-19 vaccines, supply chains have shifted from an obscure concern of invisible logistics specialists to a life and death issue in the public spotlight – not just in the US, but across the US globe.
As the Biden team pinpoints the origins of various parts, parts, and vital products, it has the opportunity to advance two of its most important promises: make the US safer and more resilient, and revitalize collaboration and coordination with like-minded allies. The United States cannot single-handedly reverse globalization, nor operate North Korean-style self-sufficiency for a variety of complex goods. What it can do, however, is interlinking international supply chains, diversifying and redirecting production, and globalizing the storage of critical goods. In this way, Biden will keep his promise to rebuild and repair Washington's alliances.
Cross-border manufacturing and trading are part of everyday life. They provide the groceries that fill our kitchens, the components that go into our cars and trucks, and the phones, computers, and other electronics that connect us to the world. Companies – and even entire countries – are now specialized in manufacturing certain parts or mastering certain industrial processes that are only part of the production chain. This division of labor, because it creates economies of scale and promotes innovation in competence clusters, has significantly improved the standard of living in dozens of countries and lowered consumer prices in many more. It made the whole world enormously richer and healthier. It would be folly to try to figure it out.
However, the fragility of a highly specialized manufacturing chain also carries some dangerous risks. The global pandemic has highlighted the weaknesses associated with concentrated sourcing: when cities and countries closed, the production of goods such as face masks and respirators was also vital for everyone. In some areas, panicked policymakers made matters worse, with export restrictions on medical equipment and food making storage in hospitals and grocery stores even more difficult.
National safety hawks aren't just concerned about public health and empty shelves. Companies committed to an unfriendly foreign government can withhold critical products or deliver electronic goods or software with so-called backdoors to monitor their users or turn off switches that may remotely disable computers, phones, cars or entire power grids. Close monopolies such as China's polysilicon and the rare earth minerals required to manufacture state-of-the-art technology give some countries exceptional geopolitical influence.
For many, the answer is to stock up and expand US strategic reserves. Stocking up on medicines, respirators, face masks and other protective equipment could help lessen the impact of the next pandemic. Larger physical supplies of essential minerals and other raw materials – as many countries are already doing with oil and gas – could limit the collateral damage to manufacturers in a geopolitical conflict.
The urge to bring production home is growing. A bill circulated in the US House of Representatives would pay Intel and other semiconductor manufacturers to set up chip foundries in the US instead of Asia. Other efforts are aimed at promoting domestic production of solar panels, electric batteries, and other building blocks for the clean energy economy. Boosting domestic production also has other benefits, starting with increasing the number of higher-paying jobs.
Still, it can get too much of a good thing. Production, which is concentrated in a few US manufacturers, will make the country more vulnerable to bottlenecks, not less. A rush to revitalize production that US companies outsourced long ago or in which they no longer have the latest expertise would be a recipe for breakdowns and bottlenecks – which makes Americans less safe, nothing more. And the sheer amount of subsidies required for large-scale reshoring will create an open invitation to powerful corporations and their lobbyists in Washington to play the system, favoring not the best or most innovative companies but the most connected.
A much better solution would be to share the burden with like-minded nations. Formal bilateral and multilateral agreements can set rules for access to production and reserves – not everyone has to mine their own rare earth minerals to be safe. Distributed stocks of shared access would both reduce the cost of building and maintaining reserves and reduce each country's risk of its own reserves being wiped out by a disaster or other emergency.
The same applies to the shared use of production capacities. By ensuring factories are ready, an international approach – for example, the proliferation of personal protective equipment production lines in the US, Canada, and Mexico – will better prepare the United States for the next global health threat. Of course, contracts must be written and rules set in advance to avoid a disaster like the current European Union vaccine combat, in which a failed attempt to coordinate vaccine supplies in 27 countries will cost thousands of Europeans the lives.
By harnessing the commercial and innovative force behind international supply chains, government-controlled manufacturing in multiple countries could also help provide alternatives to technologies and products that pose potential national security risks. It's far more likely that a group of countries can offer an alternative to Huawei's 5G gear or DJIs' drones than one nation alone.
Where should the United States go? The short list of nations includes intelligence allies such as the so-called Five Eyes – Australia, Great Britain, Canada, and New Zealand. Security partners such as Japan, South Korea and India as well as other European NATO members such as the manufacturing power plant in Germany are involved. And, of course, Mexico should also be on this list as an important trading partner.
There are growing reasons for governments to intervene in critical industrial sectors to ensure access to and quality of care. But if they do, the internationalization of manufacturing and strategic inventory will serve the United States and its allies much better than any other country that does it alone. As the Biden government moves forward on this critical issue, it also has an opportunity to add real substance to the burgeoning, but still empty, US rhetoric about reintegration into the world.