Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States

Overview

Objective and Intent

Executive Order 13806, signed by President Donald Trump on July 21, 2017, aims to assess and strengthen the manufacturing and defense industrial base and the supply chain resiliency of the United States. The order acknowledges deficiencies in the existing manufacturing landscape, citing the loss of over 60,000 factories and nearly 5 million manufacturing jobs since 2000. The objective is to ensure that America can manufacture or procure essential goods for national security, which might otherwise rely on fragile or foreign supply chains.

Scope and Assessment

The EO mandates a comprehensive assessment led by the Secretary of Defense, in coordination with several key departments. Within 270 days of the order, a detailed report is to be presented to the President that evaluates current strengths and vulnerabilities of the U.S. manufacturing sector and defense industrial base. The assessment must identify critical materials, the capabilities for reproduction, potential threats to supply chains, and the gaps in the current industrial capacity, which could affect the nation's ability to respond to emergencies or national security needs.

Strategic Importance

The foundational premise of the executive order is that a robust manufacturing sector is vital for both economic strength and national security. As supply chains grow longer and more complex, the risk of disruption increases, necessitating a reliable domestic industrial base. By requiring a multi-agency assessment, the EO aims to inform legislative and policy changes to bolster the manufacturing infrastructure, which in turn supports the defense readiness of the United States.

Legal and Policy Implications

Constitutional and Statutory Basis

EO 13806 draws on the President's constitutional and statutory powers relating to national defense and economic stability. Though the order itself does not create new legal authorities, it relies on existing laws empowering the executive branch to take measures that ensure national security. The invocation of these powers underlines the administration's priority to reposition previously offshored manufacturing capacities back to the United States.

Regulatory Changes

While the EO does not immediately enact regulatory changes, it sets the stage for future legislative and policy recommendations that could have broad implications for regulatory oversight. These changes may pertain to incentivizing domestic production, enforcing stricter controls on foreign supply chains for defense-related goods, and fostering workforce development initiatives that align with the needs of the defense sector.

Policy Shifts

The issuance of the order reflects a broader policy shift towards economic nationalism under the Trump Administration. By seeking to fortify the domestic industrial base, the EO signals a shift from globalization towards self-sufficiency in sectors deemed critical for national security. This could lead to policy frameworks that accommodate protectionist stances against foreign suppliers or prioritize U.S.-based sources for essential materials.

Who Benefits

Domestic Manufacturing Sector

The primary beneficiaries of EO 13806 are U.S. manufacturers, particularly those involved in defense-related sectors. The order is designed to stimulate job growth, enhance manufacturing capabilities, and restore the domestic industrial base lost over recent decades. This could translate to more contracts, government investment, and policy support aimed at revitalizing and expanding domestic factories.

Workforce Development

The focus on workforce skills and education programs supports employees impacted by job losses in manufacturing. By prioritizing skills development, the EO targets an upskilled workforce that can meet the evolving demands of modern manufacturing and defense needs. This, in turn, is aimed at reducing dependency on foreign labor and boosting domestic employment rates.

Defense Agencies and Contractors

Defense contractors and agencies stand to gain from a more reliable and resilient supply chain, which ensures continuity in the supply of essential goods. This could lead to more stable project timelines, reduced dependency on foreign components, and increased investment in domestic research and development.

National Security

Strengthening the manufacturing and defense industrial base directly enhances national security by ensuring the U.S. can independently produce goods essential for defense. A robust industrial base reduces vulnerabilities related to external supply chain disruptions, particularly in geopolitical conflicts or trade disputes with nations that may become unstable or hostile.

Midwest and Industrial Regions

Regions of the U.S. previously devastated by manufacturing job losses, such as the Midwest, could see economic revitalization. The emphasis on restoring manufacturing jobs could breathe new life into local economies, reducing unemployment rates, and stimulating economic growth in areas historically reliant on industrial employment.

Who Suffers

Foreign Suppliers

Foreign entities that currently supply critical materials and components for the U.S. defense sector may experience reduced business or increased competition. As the EO seeks to bolster domestic production, this may lead to the marginalization of overseas suppliers who could lose market share to U.S. firms.

Global Trade Partners

Countries involved in trade with the United States, particularly those supplying lower-cost materials or manufacturing services, might suffer economic impacts due to a shift toward U.S.-based sourcing. The EO could catalyze trade tensions if international partners perceive these moves as protectionist or contrary to existing trade agreements.

Small Businesses Dependent on Imported Goods

Small and medium-sized enterprises that rely on foreign-manufactured parts due to cost or availability might face challenges if domestic production is prioritized. Increased costs or limited access to foreign goods could make it difficult for these businesses to stay competitive, potentially leading to financial strain.

Labor Unions Opposed to Rapid Change

Labor unions that advocate for balanced approaches to workforce changes might be challenged by swift policy shifts. While workforce development is emphasized, unions may be concerned about the speed and direction of changes, especially if they perceive them as neglecting broader worker rights or protections in favor of fast-tracked industrial agendas.

Tech Companies Dependent on Global Supply Chains

The tech industry, which often operates on global supply chains for efficiency and innovation, may experience difficulties adapting to potential regulatory changes stemming from this order. If forced to transition supply chains to domestic sources, tech companies might encounter logistical and cost-related challenges, affecting their operations.

Historical Context

Economic Nationalism Trends

EO 13806 reflects the Trump Administration's broader economic strategy characterized by economic nationalism and protectionism. This aligns with numerous policy moves aimed at reducing U.S. dependency on foreign economies, such as renegotiating trade agreements to prioritize American jobs and industries.

Post-2008 Economic Recovery

The timing of the order is significant, as the United States was still grappling with the post-2008 economic recovery. After years of offshoring manufacturing jobs, the EO intended to address observed vulnerabilities in supply chains and manufacturing infrastructure, thereby reducing economic vulnerabilities and reinforcing economic resilience.

Comparison with Previous Administration Policies

The order marks a departure from previous administrations’ more globalized approach to manufacturing and trade. In contrast, policies under Obama’s administration often emphasized international cooperation and globalization, reflecting a different economic ideology that the Trump administration sought to reverse by prioritizing domestic capabilities.

Focus on Industrial Regions

Politically, this executive order aimed to deliver on campaign promises focused on revitalizing struggling industrial regions of the United States, which were key bases of support for Trump's 2016 presidential campaign. By targeting policies that foster domestic manufacturing jobs, the administration sought to maintain its voter base and fulfill pivotal electoral pledges.

Infrastructure Development Emphasis

The order fits into a series of policy initiatives emphasizing infrastructure renewal and economic self-reliance. As part of a broader agenda, the administration pursued measures to revamp the nation’s infrastructure, including revitalizing the outdated industrial infrastructure to sustain future manufacturing growth and national security needs.

Potential Controversies or Challenges

Legal Disputes and Trade Conflicts

One potential area of controversy stemming from EO 13806 is its impact on international trade agreements and possible allegations of WTO violations if measures are perceived as protectionist. The shift towards prioritizing domestic manufacturing could provoke disputes with allies and trade partners, possibly resulting in legal challenges or retaliatory tariffs.

Congressional Pushback

The executive order might face resistance in Congress, particularly from lawmakers who favor free trade policies or represent states with economies interlinked with international trade. Disagreements could emerge over budget allocations for the initiatives stemming from the order, especially financing workforce development and industrial support programs.

Implementation Concerns

Practical implementation of the mandates of EO 13806 may present challenges, including coordination across multiple military agencies and departments with sometimes diverging priorities. Ensuring comprehensive and unbiased assessments that lead to actionable strategies could be difficult given the large scope of the directive.

Balancing Economic Costs

The order calls for recommendations where benefits outweigh costs, yet striking the correct balance is complex. The economic consequences of reshoring could lead to higher costs for goods, potentially affecting consumers across the U.S. Balancing the economic expense with perceived national security benefits may be contentious among stakeholders.

Public Reaction and Political Consequences

The EO could face scrutiny for its potential impact on consumer prices and job markets beyond the manufacturing sector. Public sentiment might be polarized, with some viewing the efforts as beneficial for long-term national security, while others may perceive them as jeopardizing competitive market prices or limiting availability of goods.