Those of us in the United States are learning how closely national security relies on supply chains that run through Asia––China in particular—as the pandemic continues to expose weaknesses in global supply lines. Factory shutdowns and shipping disruptions far away and at home can seriously impact important American industries like the defense, technology, energy, transportation, public health, and biological sectors.
A panel of congresspeople and business executives recently gathered at the 2021 Aspen Security Forum to explore the global supply chain and its recent issues. The discussion was moderated by Aspen Strategy Group Director Anja Manuel and featured Representative for Michigan’s 8th Congressional District Elissa Slotkin, Representative for Texas’ 10th Congressional District Michael McCaul, Intel Corporate Vice President and Chief Government Affairs Officer Bruce Andrews, and Healthcare Distribution Alliance President and CEO Chip Davis.
The conversation led to several key insights about the global supply chain challenge as panelists discussed why supply chain disruptions can have longer-term national security implications. They also debated whether the United States could build a more resilient supply chain by onshoring key industries and revising its export-control policy framework to improve funding streams and American market competitiveness. Here are a few takeaways:
Supply chain crises are not created equal, and Covid-19 disruptions revealed vulnerabilities in the US defense industry.
In the first 90 days of the Covid-19 pandemic, the pharmaceutical supply chain showed its resiliency, while medical-surgical products, including N95 masks, caps, and gowns, were in desperately short supply. This caused legislators like Rep. Slotkin to question, “What are some of the critical things that could stop the Defense Department in its tracks?” One realization that emerged is that 90 percent of the propellant used in US munitions is singularly sourced in China, which could put the US at great risk during an armed conflict. Since learning about defense industry vulnerabilities like this, leaders in Washington have been strategizing on how to address them through legislation, corporate strategy, and coalition-building.
Semiconductor manufacturing is a critical, bipartisan national security priority.
Although the US and Europe are leaders in developing semiconductor technology, the chips that power everything from smartphones to military vehicles to advanced weapon systems are manufactured in Asia and assembled in China before they are shipped around the world. To help diversify––and protect––the manufacturing and supply chains of this global industry, US legislators recently introduced the CHIPS for America Act to incentivize onshoring semiconductor manufacturing. “This is probably the most bipartisan, bicameral piece of legislation,” said Rep. McCaul, who co-sponsored the bill. “It transcends party politics and it’s really what’s best for the American people and our national security.” If this legislation passes, many technology companies including Intel are set to invest billions in establishing US-based semiconductor fabrication facilities.
Other critical supply chains must be strengthened to protect US national security.
America’s pharmaceutical supply, critical to combatting Covid-19 and future pandemics, remains vulnerable. A high percentage of active pharmaceutical ingredients, particularly those used in generic brand drugs, and other important medicines like insulin, come from China. These supplies could be at significant risk if Washington and Beijing were to go to war with each other. In addition to semiconductors and pharmaceuticals, the US Department of Defense is examining other supply chains that are of national interest it can strategize on how to engage ally countries in addressing threats to critical products moving through China and other countries.
The US must balance the need to limit exports of advanced technology goods with its desire to promote American business.
Export controls are an important tool for protecting intellectual property, yet they can prevent American companies from doing business in China, a strategic rival that often fails to respect trademarks and copyrights. According to Intel’s Bruce Andrews, the US must ensure that its efforts to protect its technological crown jewels—many with both civilian and military applications—do not forfeit overseas markets to competitors. Washington should work with its allies to develop multilateral controls based upon shared principles. In that way, the US government can better balance its national security and commercial interests.
Watch the full recording of Building a More Resilient Global Supply Chain here.