U.S. look at supply chain set in motion

WASHINGTON — President Joe Biden on Wednesday formally ordered a 100day government review of potential vulnerabilities in U.S. supply chains for critical items, including computer chips, medical gear, electric-vehicle batteries and specialized minerals.

The directive comes as U.S. automakers are grappling with a shortage of semiconductors, essential ingredients in the high-tech entertainment and navigation systems that fill modern passenger vehicles.

Biden’s executive order also is aimed at avoiding a repeat of the shortages of personal protective gear such as masks and gloves experienced last year during the early months of the coronavirus pandemic.

“The American people should never face shortages for the goods they rely on,” the president said at the White House before signing the measure. “We need to stop playing catch-up.”

The president’s order, which had been anticipated, represents the partial fulfillment of a campaign pledge. But mandating a government study will be the easy part. Extensively modifying U.S. supply lines and reducing the country’s dependence upon foreign suppliers — after decades of globalization — could prove difficult and costly.

“A review is just a review — no immediate consequences. It depends on what comes out of it,” said William Reinsch, who was a Commerce Department official during the Clinton administration.

In a sign of the issue’s urgency, Biden met Wednesday with a bipartisan group of lawmakers to discuss the global computer chip shortage, an increasingly dire problem for manufacturers.

Later, he said the meeting had been “very pro

ductive,” and he praised lawmakers from both parties for supporting supply chain initiatives.

“This is a critical area where Republicans and Democrats agree,” Biden said.

Biden also said he had directed top aides to work with industry representatives and U.S. allies to identify possible solutions for the semiconductor shortfall. Most analysts say there are no short-term remedies available for the mismatch between computer chip supply and demand, which is expected to linger for months.

At one point, the president held up a tiny computer chip, noting that a component smaller than a postage stamp had interrupted production at major auto plants.

Biden’s order also will set in motion detailed yearlong studies of the supply needs of the defense, public health, information technology, transportation, energy and food production sectors — major swaths of the $20 trillion U.S. economy.

CHINA’S DOMINANCE

Administration officials who briefed reporters before the signing said the president’s order was not aimed at China, though they acknowledged U.S. reliance upon “strategic competitor nations” will be among the risks evaluated.

China is a dominant supplier for the U.S. of drug ingredients, electronic components and exotic materials known as rare earth elements, which are used in high-tech products such as fighter jets, smartphones and wind turbines.

In recent weeks, as Chinese officials mulled a possible shift in their rare earth export plans, the price of one — dysprosium oxide — rose by 28%. (The material is used in lasers and nuclear-reactor control rods.)

The U.S. has moved to buttress its limited domestic production capacity and secure supplies from friendly nations. Earlier this month, the Pentagon awarded a $30 million contract to Australia’s Lynas Rare Earths for the construction of a processing facility in Texas.

Biden administration officials also took pains to distinguish the president’s supply chain ambitions from former President Donald Trump’s protectionist approach. Biden said his plan to shore up domestic supply chains would help create “good-paying jobs” and new opportunities for small businesses.

“We’re going to invest in America. We’re going to invest in American workers,” the president said.

NOT GOING IT ALONE

The officials also said the administration plans to work with U.S. allies.

“This work will not be about America going it alone,” one insisted. “It’s not about re-shoring all supply chains to America.”

Biden’s ambitions extend well beyond the supply chains for computer parts and medical gear. During the campaign, he said the U.S. “needs a stronger, more resilient domestic supply chain in a number of areas, including energy and grid resilience technologies,” electronics, telecommunications infrastructure and key raw materials.

While specific proposals await the review’s outcome, the officials said they planned to tailor policies to conditions in individual industries. Biden said he would seek a blend of greater domestic production, strategic stockpiles of goods and materials, development of surge capacity, and cooperation with allies.

“This is significant,” said Michael Wessel, a member of the U.S.-China Economic and Security Review Commission. “The last administration talked the talk, but did not walk the walk.”

Biden said last year that U.S. companies involved in the production of critical goods and materials would be required to develop contingency plans for addressing supply chain risks. The pharmaceutical industry could be among those most affected, as the president vowed to eliminate tax code provisions that encouraged drugmakers to go offshore.

Biden also has promised to use federal procurement spending to spur domestic production.