In the face of growing calls to safeguard the supply of medical goods, vital technological and industrial wares, and critical resources such as rare earth minerals, the Biden administration is launching a review of the global manufacturing supply chains on which public health, crucial sectors of the economy, and national security depend. With the world now scrambling for limited supplies of reliable COVID-19 vaccines, supply chains have turned from an obscure concern of invisible logistics specialists to a life-or-death issue in the public spotlight—not only in the United States, but around the globe.
As the Biden team maps out the origin of various pieces, parts, and vital products, it has the opportunity to advance two of its most important promises: making the United States safer and more resilient, and revitalizing cooperation and coordination with like-minded allies. The United States cannot single-handedly reverse globalization, nor can it pursue North-Korea-style autarky for a host of complex goods. What it can do, however, is strategically tie together international supply chains, diversify and redirect production, and globalize the storage of critical goods. And that path will let Biden fulfill his promise to rebuild and repair Washington’s alliances.
Cross-border manufacturing and trade have become part of everyday life. They deliver the food that fills our kitchens, the components that go into our cars and trucks, and the phones, computers, and other electronics that connect us with the world. Companies—and even entire countries—now specialize in manufacturing particular parts or mastering specific industrial processes that are only part of the production chain. This division of labor, because it creates economies of scale and boosts innovation in clusters of expertise, has greatly improved living standards in dozens of countries and lowered consumer prices in many more. It has made the entire world vastly richer and healthier. It would be a folly to try to unravel it.
Yet the fragility of a highly specialized manufacturing chain comes with some dangerous risks as well. The global pandemic revealed the vulnerabilities that come with concentrated sourcing: As cities and countries locked down, so did the output of goods vital to all, such as face masks and respirators. In some places, panicking policymakers made the situation worse: Export limits on medical gear and food made it all the harder to stock hospitals and grocery stores.
National security hawks are worried about more than public health and empty shelves. Companies beholden to an unfriendly foreign government could withhold critical products, or deliver electronic goods or software containing so-called back doors for surveillance of their users, or kill switches with the potential to remotely disable computers, phones, cars, or entire electrical grids. Near monopolies, such as China’s in polysilicon and the rare-earth minerals necessary for the production of most modern technology, give some countries extraordinary geopolitical leverage.
For many, the answer is to beef up inventories and expand U.S. strategic reserves. Stockpiling medicines, respirators, face masks and other protective equipment could help lower the impact of the next pandemic. Greater physical stores of essential minerals and other commodities—like many countries already do with petroleum and natural gas—could limit the collateral damage to manufacturers in a geopolitical standoff.
The push to bring manufacturing home is growing. A bill circulating in the U.S. House of Representatives would pay Intel and other semiconductor producers to set up chip foundries in the United States instead of Asia. Other efforts aim to boost domestic manufacturing of solar panels, electric batteries, and other building blocks for the clean-energy economy. Bolstering domestic production has other benefits too, starting with increasing the number of higher-paying jobs.
Yet it can become too much of a good thing. Production concentrated with a few U.S.-based manufacturers will make the country more vulnerable to shortages, rather than less. A rush to reshore production that U.S. companies long ago outsourced or in which they no longer hold cutting-edge expertise would be a recipe for mishaps and bottlenecks—also making Americans less safe, not more. And the sheer amount of subsidies required for any large-scale reshoring will create an open invitation to powerful corporations and their Washington lobbyists to game the system, favoring not the best or most innovative companies but the best-connected.
A much better solution would be to share the load with like-minded nations. Formal bilateral and multilateral agreements can set rules for accessing production and reserves—not everyone has to mine their own rare-earth minerals to be safe. Distributed stockpiles with joint access would both lessen the cost of building and maintaining reserves and reduce each country’s risk of its own reserve being wiped out by some disaster or other emergency.
The same applies to sharing manufacturing capacity. When making sure that factories are ready, an international approach—say, spreading production lines for personal protective equipment across the United States, Canada, and Mexico—will leave the United States better prepared for the next global health threat. Of course, contracts need to be written and rules established beforehand in order to avoid a disaster like the European Union’s current vaccine melee, where a failed attempt to coordinate vaccine supplies across 27 countries will cost thousands of Europeans their lives.
By harnessing the commercial and innovative power behind international supply chains, government-guided multi-country manufacturing could also help provide alternatives to technologies and products that come with potential national security risks. It is much more likely that a group of countries can offer an alternative to Huawei’s 5G equipment or DJI’s drones than any one nation alone.
Where should the United States turn? The short list of nations includes intelligence allies, such as the so-called Five Eyes—Australia, Britain, Canada, and New Zealand. It involves security partners such as Japan, South Korea, and India, as well as other European NATO members such as manufacturing powerhouse Germany. And as a key trading partner, Mexico should of course be on that list too.
There are growing reasons for governments to intervene in critical industrial sectors to ensure access to and quality of supply. But as they do, internationalizing production and strategic stockpiles will serve the United States and its allies much better than any one country going it alone. As the Biden administration moves forward on this critical issue, it also has an opportunity to give real substance to the aspiring but still empty U.S. rhetoric about reengaging with the world.