117th Congress Preview: Supply Chain
The COVID-19 pandemic has exposed the susceptibility of supply chains to disruptions, and the consequences have raised alarms in capitals and within firms across the globe. The twin shocks of supply and demand coupled with general unpreparedness for the pandemic elicited worldwide shortages of products from needed medical technologies and pharmaceuticals to everyday household goods, such as paper towels and sanitization products.
Thus, political leaders are seeking to protect against future disruptions by turning attention to increasing domestic supply capabilities and identifying sourcing vulnerabilities in the supply of critical materials. As governments reassess, firms are determining how to strengthen supply chains without undermining competitiveness.
The pandemic-related response represents just one part of the story. Geopolitics and domestic political shifts have fundamentally altered the narrative around the policy of free trade, upon which global supply chains that have been built at considerable cost for more than two decades. National security, privacy, and competitiveness issues have come to the fore and will have a sustaining influence on policy development and firms’ efforts to develop greater supply chain resiliency.
The Biden administration, like the Trump administration, will maintain a keen focus on supply chain policy as it seeks to diversify sourcing of critical materials and relieve U.S. dependence on countries like China. Unlike the Trump administration, however, Biden will place greater emphasis on collaboration with global allies to achieve greater supply chain resilience and security. Biden has proposed a sweeping plan to invest in the nation’s manufacturing base and has pledged to initiate a broad review of supply chains over the administration’s first 100 days to pinpoint vulnerabilities and determine gaps.
Early in its tenure, the Biden administration must also determine how to proceed with actions begun by the Trump administration, like the investigation targeting Vietnam, that further threaten supply chains and target firms that attempted to comply with previous administration directives on diversification.
Congress, for its part, will continue to take an aggressive stance on supply chain issues in relation to national security and preparedness. Among other measures, Congress has taken forceful actions on a largely bipartisan basis to ban the procurement of technologies deemed a threat to security, amended and expanded the review processes for foreign investments in the United States, and passed measures to promote greater onshoring of manufacturing.
Emphasis from the Biden administration and Congress on these issues will be acute in the coming years as the United States attempts to fill sourcing gaps exposed by the pandemic and address national security concerns around the supply of critical materials. Bipartisan agreement, at least on the nature of the challenges ahead, is attainable. The trend toward legislating ever-tougher, more stringent measures against global competitors, however, will place U.S. firms in an increasingly difficult political position and may threaten the cross-party consensus necessary for broad reforms.