Will COVID-19 Catalyze Made-in-America Manufacturing Policies?

Date: Thursday, May 28, 2020
Source: Sourcing Journal

Prior to COVID-19, virtually every industrial sector recognized the urgent need to rework globe-trotting supply chains, but the coronavirus pandemic served to shine an unwelcome spotlight on the depths to which once-mighty U.S. production prowess—suddenly conscripted to crank out protective gear—has plummeted.

Politicians from both sides of the aisle stressed the need for “Buy America” legislation and provisions to revitalize the U.S. manufacturing base, during last week’s Alliance for American Manufacturing webinar entitled “Prioritizing U.S. Industrial Policy in a COVID-19 World.

The nation is suddenly interested in domestic manufacturing again because “people saw how hollowed out the sector was” when the pandemic began unleashing its chaos months ago, said Sen. Sherrod Brown (D-Ohio).

The imperative for such strategic change comes not just from companies and policies that encouraged foreign sourcing, but also from China’s carefully laid plan to dominate the global economy.

“Maybe at the very least, this crisis is what wakes us up,” said Emily De la Bruyere, co-founder of Horizon Advisory, an independent strategic consultancy focused on geopolitical, economic and technological competition.

De la Bruyere, an expert on Chinese political and economic policy, said the communist-controlled government “uses industrial planning to achieve geopolitical ends.” China, she added, wields market control, state subsidies and purloined intellectual property to “hollow out strategic industries”—thereby ensuring industries are wholly dependent on their leadership and resources.

The U.S. must “play offense…and buy American and work with our allies, work with our partners to make sure that our good intentions” don’t “fuel Beijing’s offenses,” De la Bruyere said. But the U.S. should also “play defense” by thwarting China’s efforts to pilfer IP and leapfrog rivals in innovation.

Sen. Marco Rubio (R.-Fla.) said advancements in policy and thinking in trade and manufacturing, particularly toward Made in America, depend on “whether this pandemic will result in long-term thinking and strategic planning or whether as soon as it passes, we’ll move on to the next thing.”

The pandemic has exposed a number of issues that must be addressed—regardless of the current economic fallout—because “we face a critical imbalance in our relationship with China that doesn’t just leave us vulnerable to military, geopolitical and diplomatic leverage, but economic vulnerabilities, some of which have been exposed during this crisis,” Sen. Rubio said.

For example, the senator cited heightened awareness around certain pharmaceutical products that solely come from China. It’s a problem that has been around for years before it became an issue affecting the military and now the general public.

“Right now, there is a growing energy behind the idea that we need to do something,” Sen. Rubio said. “Unfortunately, in politics the default position is to just say really nasty things and come up with things that are not realistic. The reality is that we need a strategy.”

There are no easy fixes in turning around the trade and economic relationship with China, he said, or in bringing manufacturing back to the United States.

Pursuing a Made in America strategy requires the nation to identify the industries that must have domestic production capacity, “both for national security and also because it creates good jobs,” Sen. Rubio said. “Then we have to identity what are the incentives that we can create so that the private sector will make the decision to do that and then third, it actually has to happen. What I think is undeniable is that the process off divesting from China as the core of the world’s supply chain was ongoing before the pandemic and I think this will accelerate it.”

He also called for a “post-pandemic model” for global economics in which the U.S. establishes stronger ties with countries from all over the world, thus decoupling its outsize reliance on China’s supply chain and influence.

Policy changes should be engineered to promote domestic employment, especially with tens of millions facing joblessness amid economic devastation on par with the Great Depression. “We need to pursue trade policies and broader economic policies that will foster industry in our country…[and[ protect vital jobs,” said Sen. Josh Hawley, (R-Mo.). “We want to see an economy where there are jobs available for everybody that can work and that you can support your family with.”

The Missouri senator called for efforts to reshore jobs and industrial sectors through requirements for U.S. production, tax incentives and low interest financing incentivizing companies to return jobs to the country, or keep them here versus chasing low-cost labor abroad.

“The coronavirus and the crisis that it has caused has really opened people’s eyes to the dependence from a production/manufacturing perspective on China and other foreign nations,” Sen. Hawley said. “There could be a bipartisan consensus to do something in that regard.”

Any new pandemic or economic relief legislation passed in Congress should embed “Buy America” policies into national manufacturing strategies as a key priority, said Sen. Tammy Baldwin, (D.-Wisc.).

“Buy America is going to be a really important policy moving forward and helping get our manufacturing back up and running,” she said. “If we make clear that we expect the components and the final product to be manufactured domestically, that sends a clear signal about future work orders and future purchase orders.”

 

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