America's Supply Chains

Overview

Introduction

Executive Order 14017, issued by President Joseph R. Biden Jr. on February 24, 2021, titled "America's Supply Chains," seeks to address vulnerabilities and enhance the resilience of critical supply chains within the United States. In a period characterized by heightened global competition and frequent disruptions, this Executive Order acknowledges the significance of secure and robust supply chains to national security and economic prosperity. The text emphasizes the ramifications of pandemics, cyber threats, climate disruptions, and geopolitical tensions on manufacturing capabilities and the availability of essential products and services.

Objectives and Requirements

The order mandates a comprehensive review of supply chains for key sectors, including semiconductors, high-capacity batteries, pharmaceuticals, critical minerals, and other strategically vital areas. It instructs various federal departments to report on risks, gaps, and recommended policy measures to ensure supply chain security. The framework involves consultations with public and private stakeholders, underlining the administration's collaborative approach to addressing these challenges.

Policy Intent

The EO positions resilient supply chains as critical for revitalizing domestic manufacturing, supporting small businesses, advancing climate change efforts, and fostering economic growth across diverse communities. Furthermore, it highlights the importance of international collaboration with allies, recognizing that shared values and coordinated efforts can enhance collective economic and national security.

Legal and Policy Implications

Regulatory Measures and Statutory Changes

Executive Order 14017 initiates several regulatory and statutory reviews concerning the nation's supply chains. By calling for detailed assessments and recommendations from various agencies, the order aims to identify and rectify policy flaws or gaps that could undermine supply chain resilience. This often necessitates revisiting existing regulations and developing new policy frameworks to facilitate adaptive, responsive supply chains.

Constitutional Authority

The legal authority for Executive Order 14017 stems from the President's constitutional role in safeguarding national security and managing interstate commerce. While the order itself does not mandate specific legislative changes, it leverages existing executive powers to direct federal agencies and galvanize interagency cooperation. This approach illustrates how the executive branch can guide national policy without directly legislating outcomes.

Impact on Policymaking

This EO represents a significant shift toward proactive supply chain management. It underscores the necessity for federal involvement in what traditionally might have been considered private industry domains. By intertwining supply chain resilience with national security concerns, the order advocates for a new policy paradigm where industrial strategy aligns closely with security imperatives.

Who Benefits

Domestic Manufacturing and Workforce

The order is decidedly beneficial for American manufacturing industries. By promoting domestic production and modernizing manufacturing capabilities, the EO seeks to reduce dependency on foreign supply chains, bolstering local industries. The downstream effects are expected to include growth in manufacturing jobs and investment in technological advancements.

Small Businesses and Economically Distressed Areas

Small businesses stand to gain from supply chain fortification efforts. By minimizing disruptions and creating more predictable supply conditions, these enterprises can enhance operational stability. Moreover, the focus on economically distressed areas promises to spur localized growth and entrepreneurial opportunities.

Environmental and Climate Advocates

The EO's emphasis on addressing the climate impacts of supply chains aligns closely with environmental policy objectives. Measures to develop sustainable supply chain practices and reduce carbon footprints will resonate with climate advocates seeking government action on environmental issues.

Collaborating International Partners

International allies aligned with U.S. values are also expected to benefit from increased cooperation in addressing supply chain vulnerabilities. The collaborative component of the EO facilitates collective action that could lead to shared technology developments, strategic stockpiling, and reinforced economic partnerships.

Technology and Innovation Sectors

By prioritizing innovation and research development, particularly within sectors like semiconductors and information technology, the EO supports industries focused on cutting-edge technologies. This aligns with the nation's ambition to remain at the forefront of technological advances and secure critical technological supply chains.

Who Suffers

Foreign Dependence Challenged

Countries that currently supply key materials to U.S. industries may face economic repercussions, as reduced American dependence could lead to decreased demand. This applies notably to nations identified as competitors or those deemed unreliable partners in supply chain security assessments.

Industries Resistant to Change

Industries accustomed to long-standing supply chains might encounter initial disruptions as the EO's recommendations are put into practice. Firms that have optimized their operations around global supply chains could grapple with costs and complexities associated with restructuring for domestic production.

Potential Increase in Domestic Costs

While the EO aims to strengthen domestic capacities, the push for onshoring could result in short-to-medium-term increases in production costs. Higher labor and manufacturing costs domestically compared to foreign suppliers could translate into higher prices for consumers, at least until efficiency gains mitigate such effects.

Geopolitical Tensions

The EO may strain diplomatic relations with countries negatively impacted by U.S. supply chain shifts. Nations directly identified as potential adversaries could perceive these moves as strategically hostile, potentially leading to retaliatory economic measures or increased diplomatic friction.

Technological Adjustment Challenges

Sectors reliant on outdated technologies may find it challenging to meet the EO's innovation-driven mandates. These demands for modern, resilient supply mechanisms may strain slower-to-adapt parts of the industry, necessitating significant investments in technological upgrades to remain competitive.

Historical Context

Historic Supply Chain Vulnerabilities

The importance of secure and resilient supply chains has been laid bare by historical events like the 2007-2008 financial crisis, natural disasters such as the 2011 Fukushima earthquake, and geopolitical tensions that disrupted free trade. These events have frequently underscored the interconnectedness of global markets and the vulnerabilities inherent in complex international supply chains.

Aligning with Economic Nationalism

The EO aligns with an increasing shift towards economic nationalism witnessed across many regions over the past decade. It mirrors some elements of previous administrations' calls for domestic industrial renaissance, such as President Donald Trump’s emphasis on "America First" and manufacturing independence, though the current approach has a stronger multilateral dimension.

Pandemic-Inspired Policy Adjustments

The COVID-19 pandemic dramatically exposed the fragility of global supply chains, as countries scrambled for personal protective equipment and critical supplies. This experience has accelerated efforts to address vulnerabilities, driving policy adaptations that are now enshrined in Executive Order 14017.

Continuity and Change in Biden's Governance

Emergent from a backdrop of heightened geopolitical competition, the EO fits within President Biden's broader agenda prioritizing domestic resilience and international collaboration. Unlike earlier policies skewed more towards unilateralism, this order places significant emphasis on international cooperation and alliances.

Integration with Climate and Economic Policy

The order contributes to the Biden administration’s broader policy narrative, which integrates economic recovery with climate action. By fostering resilient supply chains, the administration aims to simultaneously spur economic growth, mitigate climate change impacts, and reinforce industrial capabilities.

Potential Controversies or Challenges

Legal Challenges from Trading Partners

One potential avenue for controversy involves legal challenges from trading partners who might argue that efforts to restrict certain imports or prioritize domestic production violate international trade agreements. Disputes within bodies like the World Trade Organization could arise if perceived as protectionist measures inconsistent with free trade principles.

Congressional Scrutiny

Despite bipartisan recognition of supply chain vulnerabilities, Congress might scrutinize the approach and implementation of the EO, questioning the fiscal and practical implications of extensive supply chain modifications. Funding allocations for identified recommendations could become a battleground, particularly in an ideologically divided legislature.

Impact Assessment and Feasibility Concerns

Challenges in accurately assessing supply chain vulnerabilities and posing feasible solutions could emerge. The scope and complexity of cross-sectoral assessments necessitated by the order could lead to delayed or preliminary findings, impeding the order's implementation and scrutiny.

Risk of Overemphasizing National Security

There is a potential risk that the emphasis on national security might overshadow economic interests, leading to policies that could unnecessarily constrain market dynamics. Balancing security with economic efficiency and competitiveness may become a central challenge in execution.

Infrastructural and Technological Constraints

Implementing the EO’s recommendations could be hampered by existing infrastructural and technological constraints. The required modernization and transformation may be met with resistance not only within industry but also from within federal and state governments tasked with orchestrating these changes.