On Sept. 10, the Commerce Department will host a summit on “proactively strengthening supply chain resilience.” If the Biden administration is serious about this goal, it needs to begin by reinvigorating its lackluster trade agenda.
Since COVID, there has been strong bipartisan support to ensure that critical supply chains are not disrupted by acts of nature or adversaries’ belligerence. The scale of this task is epic.
McKinsey reports, for example, that the average automaker has 250 tier-one suppliers and a base of 18,000. In the case of semiconductors, the Center for Strategic and International Studies finds that chips cross no fewer than 70 borders before final assembly. Supply Chain Dive reports that, in 2020, Intel relied on 9,000 suppliers spread across 89 different countries.
Then there’s the hefty price tag of rebuilding supply chains. New drug manufacturing facilities, for example, are estimated to cost $2 billion and take five to 10 years to build. Even if new facilities were to quickly funded and given the necessary approvals, skills shortages in the U.S. and abroad would threaten to leave many of them idle.
If supply-chain resiliency actually means something, it cannot be confused with autarky. As President Biden’s Executive Order 14017 stated: “It is neither possible nor desirable to produce all essential American goods domestically.” In other words, supply-chain resiliency will depend on trade. Yet, Biden has done almost nothing to strengthen trade relationships with America’s allies.
For example, Biden has refused to negotiate free trade agreements with like-minded partners such as the European Union, Japan and the United Kingdom.
His signature trade initiative, the Indo-Pacific Economic Framework, mostly enforces labor and environmental standards and says nothing about guaranteed access to markets.
Other Biden initiatives, such as the U.S.-EU Trade and Technology Council, have produced a plethora of joint statements and declarations but few binding trade outcomes. This approach is insufficient to reshape global supply chains.
There is bipartisan support in Congress for a more ambitious approach. The House Select Committee on China advocates for the U.S. to negotiate bilateral trade agreements with Taiwan, the U.K. and Japan as part of its strategy to encourage “U.S. trade and technology collaboration with its allies and partners while decreasing dependence on the [People’s Republic of China] in critical supply chains.”
These deals would strengthen supply chains by eliminating tariffs and expanding regulatory cooperation on a broad range of issues, from conformity assessment to data exclusivity.
The Medical Supply Chain Resiliency Act, which the select committee also endorses, asks the United States trade representative to tackle these regulatory issues on a sectoral basis, making it an ideal roadmap.
The bill begins from the premise that “it is critical that the United States diversify its trade relationships and prioritize partners that adopt and maintain reliable supply-chain policies.”
To this end, it proposes negotiating agreements with trusted trade partners. These would be sector-specific deals covering pharmaceuticals and other key medical products. The idea is to promote trade with allies committed to high regulatory standards, intellectual property protection and transparency in government procurement.
Importantly, the Medical Supply Chain Resiliency Act would exempt trusted trade partners from trade-restrictive measures that the U.S. issued in the name of national security, such as Section 232 tariffs or export bans.
This provision is essential. It would lower trade policy uncertainty under the very conditions where supply chains need to be resilient, not politicized. Trusted trade partners could thus be expected to join with greater confidence that their investment won’t be squandered.
The Commerce Department’s summit comes at a critical moment. It makes no sense to talk about supply chains without talking about trade, but America’s allies have lost confidence that the U.S. is interested in having this conversation. To convince them otherwise, the administration needs to embrace a more ambitious trade agenda.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, and a global fellow at the Wilson Center’s Wahba Institute for Strategic Competition.