AAM to the ITC: The Pandemic Makes the Case for a Reshoring Effort

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The coronavirus pandemic has exposed the shortcomings of global supply chains for critical medical goods. The solution must not be to make it easier to import more stuff.

That was the message Alliance for American Manufacturing President Scott Paul delivered to a U.S. International Trade Commission (ITC) hearing (delivered via video conference call, natch) on Wednesday in Washington, D.C. At the request of Congress, the ITC is examining the strengths and weaknesses in the industries that make pandemic-related products like medicine, medical devices and personal protective equipment (PPE).

Paul urged the commission not to discount how the inability of the United States to source these critical products is caused, in large part, by a lack of production capacity. We simply don’t make that stuff here anymore!

“We expect you will hear more calls for a global supply chain at today’s hearing, as well as proposals to further ease import restrictions of finished goods or inputs needed for domestic production,” Paul said in his written testimony. “We encourage you to challenge such calls for tariff relief with commitments to reshore production, create American jobs, and make our nation more prepared to independently respond to the next crisis.

“Now is the time to break the vicious cycle of implementing policies that reward imports over domestic production. Both our economic and national security are at stake. We must be better prepared for the next crisis, and that requires taking bold action, starting right away.”

Paul talked about a number of small American manufacturers that pivoted from their traditional businesses to PPE production this spring as COVID-19 settled in across the country – and they managed that pivot with little to no direction or coordination from the federal government. Meanwhile, state governments threw gobs of cash at newly formed companies and associations of middlemen to get PPE to their local healthcare systems. The state of California, for example, has given over a billion dollars to BYD – an ostensibly private Chinese electric vehicle manufacturer – to crank out hundreds of millions of surgical and N95 respirator masks.

Said Paul:

“The absence of adequate domestic production capacity for things like face shields and respirators, coupled with the frailty of on-demand global supply chains and our utter reliance on them — for everything from the ingredients in our medications to parts of breathing machines — has left us dangerously exposed during an international health emergency.

“But, again, the solution is not to double down on imports. Rather, our elected officials must prioritize policy actions that enable American manufacturers to rebuild lost production and reward companies who choose to bring offshore production back home.”

So what can the ITC and leaders on Capitol Hill do to bring back critical manufacturing? Paul outlined specific policy actions that lawmakers and others can take to encourage local production of these essential goods, which will help ensure the United States is in a better position the next time a crisis hits. Those recommendations included:

No. 1: Tariff relief must be temporary and reserved only for emergency situations to address immediate health and safety needs when short-term market limitations are present.

“Within hours of the administration’s April 19, 2020, announcement that it would allow a 90-day deferment of tariff payments, importers, retailers and other interests issued press statements demanding that their tariff holiday be extended or made permanent. A week later, hundreds of companies and trade associations whose business model relies on imports wrote a letter demanding that “all duties and fees” be removed. This was a blatant attempt to capitalize on the coronavirus crisis to increase America’s reliance on imports.“It cannot be ignored that special treatment for imports has a dampening impact on the potential for American workers and manufacturers to step up for their nation in a time of crisis, or on those facing widespread layoffs, furloughs, and closures. Unwarranted tariff relief may very well signal the demise of a domestic company struggling to compete. The bottom line is that tariff relief must be limited and temporary, focusing on immediate health and safety concerns.”

No. 2: Prohibit China’s state-owned and state-supported firms from accessing recovery dollars or future spending to rebuild our manufacturing capabilities.

“As much as $419 million in Paycheck Protection Program (PPP) funds have gone to these companies, many of which have direct ties to China’s authoritarian regime. In some cases, it even appears that U.S. taxpayer money went to companies with direct links to the Chinese military. According to new research, at least 32 of these Chinese companies secured loans of $1 million or more. Some even received loans between $5 and $10 million.

“We must confront the reality that China is using the COVID-19 crisis to propel its own interests forward. In early March, a Chinese official remarked that ‘it is possible to turn the crisis into an opportunity — to increase the trust and the dependence of all countries around the world of ‘Made in China.’’” 

No. 3: Enhance domestic content preference laws in our recovery efforts.

“Congress and the administration have already missed several opportunities to ensure that investments are targeted at recovery here in America and discouraged from being used for purchases of imported goods. While the Small Business Administration’s application for PPP loans includes a certification that ‘To the extent feasible, I will purchase only American-made equipment and products,’ the provision is unenforceable and, to our knowledge, being completely ignored. Federal relief assistance granted to multi-national companies should be conditioned on commitments that those dollars be allocated to U.S. operations along with robust reshoring plans. Jobs created or supported should be those of American workers; and critical supply chains strengthened by federal dollars should be those here in America.

No. 4: Create greater transparency on a product’s country of origin to empower consumers, small businesses, and government purchases to be part of the solution.

“We should be taking steps to make it easier and more reliable for American consumers to buy products labeled “Made in USA.” This requires stronger enforcement of labeling laws, as well as broader application to reflect the changing nature of retail sales. Online retailers currently do not need to disclose country of origin information for products they sell, making it nearly impossible for consumers, who in poll after poll express strong preferences for American-made products, to align their spending with their values.”