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2. Global Supply Chains: Compete, Don’t Retreat
- Author:
- Committee for Economic Development of the Conference Board
- Publication Date:
- 07-2021
- Content Type:
- Policy Brief
- Institution:
- The Conference Board
- Abstract:
- For decades, global supply chains have become increasingly integral to the US economy and have been embraced by business and successive US Administrations because they increase efficiency and US competitiveness. But over the past several years, criticism has grown beyond the argument that US jobs are being exported to include concern about a more hostile and competitive global landscape.1 Then the COVID-19 pandemic struck, and lockdowns were imposed. Production in general was disrupted, shutting down suppliers and interrupting transportation channels; foreign governments closed their borders or hoarded crucial supplies for their own peoples.2 Prominently, lifesaving supplies—including personal protective equipment (PPE) and pharmaceutical production commodities, often sourced from abroad—were in short supply, putting frontline health care workers at even greater risk and complicating vaccine distribution.3 And then, as the pandemic began to ease and demand for goods increased, the enormous container ship Ever Given was grounded in the Suez Canal for six days, bringing much of goods transport around the world to a grinding halt and raising fears of even greater supply chain bottlenecks and commercial chaos.4 This truly unprecedented turn of events has exposed challenges to US reliance on global supply chains. Critics of the “offshoring” of jobs have assigned much of the economic and even the human pain of the pandemic to unwise and excessive dependence on global supply chains that include countries with “command” economies rather than free-market ones, or hostile nations that are unreliable sources of essential goods. The pandemic has also raised national security concerns about the reliability and resiliency of global supply chains, and businesses have been forced into workarounds of their own practices. Given the size of China’s economy, its extensive role in global supply chains, its growing military strength, and the growing tensions in its bilateral US relationship, China is at the nexus of these major concerns about supply chain resilience. The new administration has responded to this turmoil with a series of policy directives,5 studies on the subject,6 and legislative proposals under active consideration in Congress covering both short-term and medium-term responses, including a twenty-first century industrial strategy—which would be a major change of US policy direction. Global trade in materials, tools, components, and services deserves an immediate assessment of both security and economic needs for the long term.7 Security with prosperity must be the goal, and the nation must fully comprehend the bigger picture to achieve that outcome. This brief will put the role of global supply chains in the US and the world economy in perspective. It will offer recommendations to manage the economic and security challenges of global supply chains in the postpandemic economy to ensure that the US remains an innovative and competitive global leader.
- Topic:
- Economy, Trade, Strategic Competition, COVID-19, Commerce, and Supply Chains
- Political Geography:
- North America, Global Focus, and United States of America