On February 24, 2022, the White House released its annual summary report on domestic supply chains. The report outlines progress toward supply chain goals made during the first year of the Biden administration, and discusses what it hopes to achieve on supply chains going forward. On the same day, the U.S. Departments of Defense, Homeland Security, Commerce, Energy, Agriculture, Transportation, and Health and Human Services (collectively, the “Departments”) released reports focused on supply chain issues at their specific agencies and in industries they monitor. These reports provide clues on where the administration will focus its supply chain policy in the future.
The White House and the Departments released these reports on the one-year anniversary of President Biden signing Executive Order 14017, which directed the administration to conduct a whole-of-government approach to address vulnerabilities in critical supply chains.1 The White House report builds on the June 2021 100-day reviews of the semiconductor, battery, critical minerals, and pharmaceutical product supply chains.2
While the reports primarily focus on progress made in improving domestic supply chains in the first year of the administration, they also discussed areas where the U.S. economy is overly reliant on other countries. Areas featuring China are summarized in the next section.
Focus on China
The White House and Departments reports include industries where the U.S. is heavily reliant on China and identified trade policy goals to reduce that dependence going forward.
The White House report explicitly states that “we must reduce our dependence on China and other geopolitical competitors for key products.”3 It expresses support for a “friend-shoring” approach to offshore supply chains, saying it will focus on building relationships with allies when conducting trade policy.4 It provides as an example of “friend-shoring” the recent agreements with the EU to reduce tariffs on steel and aluminum products, and states it expects deeper cooperation with countries like the EU and Japan on this issue in the future.5
The supply chain reports from the Departments are more focused on select products and industries where American industries are heavily reliant on Chinese products. A list of reports that discuss Chinese industry dominance is included below:
- Department of Energy: China dominates in the solar photovoltaic industry and the global rare earth mineral extraction industry.6
- Department of Transportation: “Three Chinese companies account for 96 percent of the world’s dry cargo containers and 100 percent of the refrigerated containers.”7
- Department of Agriculture: China provides more than 70 percent of imports for certain active pesticide ingredients, some of which are not available at all in the United States.8
- Department of Homeland Security and Department of Commerce: Chinese manufacturing in the information and communication technology space creates cybersecurity risks.9
- Department of Defense: Defense procurement is threatened by Chinese dominance in the lithium battery, casting and forging, and microelectronics industries.10
The administration has already established that it is a policy priority to reduce U.S. dependence on China, especially in these critical industries. Legislation like the America COMPETES Act and the U.S. Innovation and Competition Act, profiled in last month’s newsletter, are already increasing investment in some of these sectors, particularly in the semiconductor industry. Similar investment and regulation in these spaces may be coming.
1 The White House, The Biden-Harris Plan to Revitalize American Manufacturing and Secure Critical Supply Chains in 2022 (Feb. 24, 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/24/the-biden-harris-plan-to-revitalize-american-manufacturing-and-secure-critical-supply-chains-in-2022/.
2 The White House, Executive Order on America’s Supply Chains: A Year of Action and Progress (Feb. 24, 2022) 4, https://www.whitehouse.gov/wp-content/uploads/2022/02/Capstone-Report-Biden.pdf.
6 Department of Energy, America’s Strategy to Secure the Supply Chain for a Robust Clean Energy Transition (Feb. 24, 2022), 9, 13, https://www.energy.gov/sites/default/files/2022-02/America%E2%80%99s Strategy to Secure the Supply Chain for a Robust Clean Energy Transition FINAL.docx_0.pdf.
7 Department of Transportation, Supply Chain Assessment of the Transportation Industrial Base: Freight and Logistics (Feb. 24, 2022), 21, https://www.transportation.gov/sites/dot.gov/files/2022-03/EO 14017 - DOT Sectoral Supply Chain Assessment - Freight and Logistics_FINAL_508.pdf.
8 U.S. Department of Agriculture, USDA Agri-Food Supply Chain Assessment: Program and Policy Options for Strengthening Resilience (Feb. 24, 2022), 7, https://www.ams.usda.gov/sites/default/files/media/USDAAgriFoodSupplyChainReport.pdf.
9 U.S. Department of Commerce and U.S. Department of Homeland Security, Assessment of the Critical Supply Chains Supporting the U.S. Information and Communications Technology Industry (Feb. 24, 2022), https://www.dhs.gov/sites/default/files/2022-02/ICT Supply Chain Report_0.pdf.
10 Department of Defense, Securing Defense-Critical Supply Chains: An Action Plan Developed in Response to President Biden’s Executive Order 14017 (Feb. 24, 2022), 19, 27, 35, https://media.defense.gov/2022/Feb/24/2002944158/-1/-1/1/DOD-EO-14017-REPORT-SECURING-DEFENSE-CRITICAL-SUPPLY-CHAINS.PDF.