Three Things to Know About Rebuilding Supply Chains

By Elizabeth Brotherton-Bunch
Sep 20 2023 |

Appearing before a House Energy and Commerce subcommittee, Alliance for American Manufacturing President Scott Paul testified about what needs to happen to grow U.S. manufacturing.

The House Energy and Commerce Subcommittee on Innovation, Data, and Commerce on Wednesday examined ways to strengthen America’s fledgling supply chains — and our own Alliance for American Manufacturing President Scott Paul testified that there’s three main things to keep in mind.

First, there is certain to be another disruption, although we cannot predict how, where, and when it may arrive. Think back to 2020; the COVID-19 pandemic took most of us by surprise. Aside from a handful of experts dedicated to the issue specifically, it seemed inconceivable that the United States would find itself without basic supplies like face masks. But that’s just what happened. Another crisis like the pandemic is bound to happen again.

Second, many of our supply chains are still incredibly frail and not yet de-risked, decoupled, localized, or sufficiently resilient. While there is increased awareness of our supply chain shortages, not enough has been done to actually fix them. We remain woefully dependent on China and even Russia for the things we need. As Paul noted in his written testimony:

Even though the United States generally accounts for 20 percent of the world’s consumption, our global market share for making things falls woefully short of that. We manufacture only about 10 percent of the world’s electric vehicles, 7 percent of lithium-ion batteries, 12 percent of semiconductors (down from 37 percent in less than a generation), and 4 percent of printed circuit boards.6 There is only one domestic producer of grain-oriented electrical steel needed to build out our energy grid, and there are many other examples of greatly diminished capacity in critical industries such as machine tools.

Not great.

Third, while some progress has been made in identifying assets and vulnerabilities through the Biden administration’s Supply Chain Review efforts, the federal government still does not currently have the complete set of tools and authorities to identify, prevent, and mitigate supply chain vulnerabilities before they spiral out-of-control. As the saying goes, admitting you have a problem is the first step — but then you have to figure out exactly how to fix it. Policymakers are (finally) aware that American supply chains are a problem, but it’s tough to figure out how best to tackle it without the full picture. Some of the most glaring issues are being addressed — everybody knew the United States needed to ramp up semiconductor production, and so Congress passed the CHIPS and Science Act — but there’s far more work that needs to happen to figure out where to allocate resources.

Much of the subcommittee’s work on Wednesday centered on that effort, including legislation aimed to address it. Paul noted that The Supply CHAINS Act, introduced by Rep. Lisa Blunt Rochester (D-Del.), provides a good starting point, as it would create a new Supply Chain Resilience Crisis Response Office at the Commerce Department tasked with identifying and addressing supply chain gaps.

Other countries have similar systems in place, allowing for a coordinated, whole-of-government approach to addressing shortages, Paul noted. Operating without one puts the United States at a disadvantage.

“At the peak of the supply chain crisis in the summer of 2021, private sector entities did not know who to contact for assistance with critical supply chain concerns,” Paul wrote in his written testimony. “It would have been far preferable to have a central office with senior leadership to coordinate actions across government as opposed to a haphazard, inaccessible approach across many departments. The current approach of relying on a host of different federal agencies – each with its own unique responsibilities – effectively leaves no single entity to identify, manage, and respond to supply chain vulnerabilities amidst a crisis.”

Paul also cautioned that any government effort to take on supply chains needs to include workers voices. Aside from the Supply CHAINS Act, there are several pieces of legislation being considered by the committee to address supply chain gaps, and not all of them include a place for the table for unions.

“The Alliance for American Manufacturing is a labor-management partnership, and I can speak with firsthand knowledge that giving both companies and workers a voice greatly enhances the work of building a policy framework to revitalize American manufacturing,” Paul said. “Some of the best ideas come straight from the workers on the shop floor.”

Above all, it’s important to remember that the United States cannot rebuild its supply chains without good policy, such as incentives to locate production in the United States and a balanced trade policy.

“The supply chain disruptions that have plagued our nation in recent years must be viewed through the lens of years of public policy decisions that both facilitated, and in some cases actively encouraged, the offshoring of domestic production and critical supply chains,” Paul said. “The pandemic and its subsequent supply chain shocks exposed in rather dramatic fashion that years of flawed tax, trade, procurement, and other economic policies have put the United States in a perilous position of being overly dependent on imports.”

Click here for Paul’s oral testimony and here for his written testimony. You can view the full committee hearing here.