Biden looks to re-engineer global supply chains

US global

US President Joe Biden is set to make supply chain management an important part of his politics, apparently.

In a statement released on Wednesday, February 24, Biden said that he was “shortly going to be signing another executive order that’ll help address the vulnerabilities in our supply chains across additional critical sectors of our economy so that the American people are prepared to withstand any crisis and rely on ourselves.”

Much of the emphasis in the short-term concerned the provision of health-care equipment, however, Biden also articulated broader concerns, such as not having to “rely on a foreign country — especially one that doesn’t share our interests or our values — in order to protect and provide our people during a national emergency.” He also mentioned what he saw as the benefits of having “resilient, diverse, and secure supply chains” that would “help revitalize our domestic manufacturing capacity and create good-paying jobs, not $15 an hour”

Later in the statement, the president singled out semiconductor production as a particular focus for supply chain re-design; “We need to make sure these supply chains are secure and reliable.  I’m directing senior officials in my administration to work with industrial leaders to identify solutions to this semiconductor shortfall and work very hard with the House and Senate.” At present, a number of US companies, notably in the automotive sector, are experiencing a shortage of semi-conductors and attempts are being made with Taiwan, a major source of semi-conductors, to increase production.

It is hard to know what to make of this declaration. On the surface, it seems to be advocating a systematic restructuring of global trade. Whilst the production of PPE is not of huge importance to the global economy, semiconductor production is. It appears that the policy of the US Government will be to redesign enormous areas of global trade with particular attention paid to ensuring many products are made in the US. Above all, the policy seems to be focussed on moving production out of China.

The political and economic implications of this are substantial. One early response was a press release from the US Chambers of Commerce, who commented that “We can mitigate risks to our supply chains by working with key international partners to diversify our supply chains and stockpiling select products – and we trust that the administration will engage closely with the private sector to ensure that any policy recommendations reject punitive approaches, new trade barriers, and one-size-fits-all solutions”. This statement suggests many are concerned about trade barriers.

Whether any of Biden’s new supply chain policies will happen and when they will happen is unclear. However, even if a small part of such a policy was implemented the impact on trade-lanes would be very noticeable. What perhaps is more certain is that the restructuring of electronics supply chains, which has been continuing for several years, will move further away from assembly in China.

Source: Transport Intelligence, February 25, 2021

Author: Thomas Cullen