After the coronavirus pandemic exposed the precarious position of the American economy, Sens. Josh Hawley (R-Mo.) and Marco Rubio (R-Fla.) have thrown their support behind measures to bolster our feeble manufacturing infrastructure and limit our dependence upon global supply chain partners who are indifferent, or even antagonistic, to American interests. Our reliance on other countries to manufacture our medications, masks, and medical equipment has left our ultimate fate up to the whims of foreign governments and multinational corporations.
In an April Washington Post op-ed, Hawley emphatically endorsed measures to create a more resilient American economy: “It is past time to secure our supply chains by adopting strong local-content requirements for all industries essential to our crisis response, to be phased in when the current emergency ends,” he wrote. “These measures should be paired with generous financing for all businesses looking to move back home.” In addition to ensuring that America is able to efficiently and effectively respond to future crises, these measures could help provide employment in an economy currently hemorrhaging jobs. It is extremely important that American leaders understand, as Hawley does, that global influence stems from a solid manufacturing base.
In May, Rubio proposed legislation that would increase the taxes on American companies’ Chinese-earned profits. The bill would also prevent American companies from selling sensitive technology to China, helping to preserve our current technological advantage and ensure that the fruits of our research and development don’t wind up in the wrong hands. While it is unlikely that this measure will be passed, the bill represents a step in the right direction. In 2018, the Chinese government spent over $35 billion buying intellectual property rights from foreign firms in the aviation, telecommunications, computing, and manufacturing industries. Firms sold their intellectual property rights in exchange for access to the massive and ever-growing Chinese marketplace.
President Trump, long a critic of China and a proponent of bringing manufacturing back from overseas, is considering establishing a $25 billion reshoring fund to subsidize the additional operating costs of firms that move operations back to America. This action would help to alleviate the additional financial burden for firms who reshore their operations, as the operating costs in China and other developing countries are significantly lower. Another more realistic solution is the establishment of a fund that subsidizes the costs of firms that move operations from China to other developing countries with favorable attitudes towards America, which would still allow companies to produce their goods cheaply while refraining from putting our national security in jeopardy.
Our economy’s structural vulnerabilities and lack of resilience are not lost upon China. Former Chinese General Qiao Liang made recent statements recognizing the tenuousness of our situation. He acknowledges the definite American advantage in technology, research, and development, but asserts that “high technology always falls back on manufacturing.” If America itself doesn’t have the capacity to produce goods of strategic importance, then its technological advantage over competitor countries is negated. Our reliance upon less-than-friendly trading partners, like China, for these goods becomes leverage for them and a vulnerability for us.
In the post-coronavirus world, America needs to internalize the lessons from the pandemic and take significant and tangible steps to secure our strategic supply chain and create a stronger, more resilient economy.