‘People can’t buy what can’t be delivered’: Addressing Global Supply Chain Vulnerabilities
WASHINGTON — We all remember last year’s short-term stampede for toilet paper. But while stores were able to eventually restock personal products and cleaning supplies, will we be able to do the same with a shortage of semiconductors and other strategic priority goods essential to the nation’s interest?
Not only the pandemic, but trade disputes and climate concerns continue to highlight the risks of current supply chains and force nations to think about the affordability and accessibility of products and trade routes.
“Our country just went through this massive once-in-a-generation stress test,” Rep. Mike Gallagher, R-Wis., shared during a virtual discussion hosted by the non-partisan Wilson Center policy forum. “One of the biggest and enduring effects [will be] to accelerate the discussion of shoring up supply chain vulnerabilities.”
While the pandemic placed significant strain on global commerce, other factors are also at play forcing companies to evaluate operations moving forward.
Reducing costs was a priority pre-pandemic. Now, retired Ambassador Mark Green who serves as Wilson Center president, director, and CEO said it no longer makes sense to focus purely on low-cost strategies. “People can’t buy what can’t be delivered,” he said.
Now, the seamless movement of products across borders can’t be taken for granted and the inherent weaknesses of globalization must be taken into account.
“We need to go through what we’ve learned,” said Gallagher, suggesting the nation work with international partners to mitigate serious supply chain vulnerabilities through cohesive, sustained efforts. “We need the right framework for identifying what’s actually critical.”
Green agrees that the nation needs international partners with secure economic links and shared data as a “matter of smart power” to work toward making supply chains more transparent, more reliable, and more resilient. “Our strength isn’t merely derived from hard power, but also from the genius of market economies,” he said.
“Canada, the U.S., and Mexico share some of the most sophisticated supply chains in the world,” said Chris Sands, director of the Wilson Center’s Canada Institute, pointing not only to collaborative logistics networks for consumer goods like automobiles, but also defense products and technology. He said those systems didn’t happen on their own, however, but were created through a series of conscious efforts and trade agreements knit together.
Creating more smart supply chain partnerships like these requires transparency, agility, and “doing a better job of data mapping trade,” said Sands. He said it would help if publicly collected data was available to the private sector, but that cybersecurity leadership and regulatory mutual recognition — “cutting the duplicative red tape of regulatory standards” — were also strongly desirable.
As lines between military and trading partners are disappearing, “we can’t afford to have our defense industrial base experience the same supply chain disruptions as our medical industry did last year,” said Sands.
And certain potentially nefarious actors are already poised to weaponize key supply chains and using economic language suggesting they may be prepared to act on it.
“The Chinese Communist Party… will use any and all supply chain [influence] to put our economy at risk,” said Sands, reminding that China controls many critical resources, including rare earth minerals, mining, and energy resources essential to the future world economy. The U.S. also has a dangerous over-reliance on Chinese manufacturing of essential goods for national health, as the pandemic’s early shortages has shown.
Modern supply chains must take all of this into account. Efficiency must now be met with competitive resilience and the ability to adjust flexibly and quickly with like-minded fair-market partners.
“The best way to compete with China in the long-term is to take the offensive,” said Gallagher. But instead of resource nationalism or a “Buy American mentality,” he said the nation should adopt an out-compete mindset and “harness that Buy American energy into a free-world framework.”
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