Building industrial resilience with a little help from our friends

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The recent 100-day White House report released in response to President Biden’s Executive Order 14017, “America’s Supply Chains,” correctly highlights the need to strengthen domestic manufacturing in critical areas such as semiconductors, batteries, critical minerals and pharmaceuticals, issues underscored by the COVID-19 pandemic and recent supply chain reports. One additional report finding that deserves further attention is the conclusion that the United States “cannot address its supply chain vulnerabilities alone.” The recognition that we “must work with America’s allies and partners to strengthen our collective supply chain resilience” is commonsense and reinforces a top administration priority, but the specifics on how to concretize this collaboration need some attention. To that end, the Executive Branch and Congress must take some practical steps to both foster industrial resilience and strengthen partnerships.

The need for revitalizing domestic manufacturing and strengthening supply chains has been prioritized in both the Biden and Trump administrations and funding to address these challenges has started to flow in areas ranging from vaccines, minerals and semiconductors. One important qualifier noted in the White House report is that we can’t make everything here in the United States. The market conditions that led to the offshoring of many manufacturing sectors can be temporarily adjusted through incentive structures and government investment but building everything domestically is not a sustainable strategy.

This is where our friends come in. Strengthening allied and partner contributions will draw on their competitive advantages in various capability areas and requires only a modest investment of time and resources to achieve. The key is to move beyond broad policy pronouncements and instead foster real industrial collaboration on actual defense programs. Here’s how we can do that.

Fortunately, we start with a very strong baseline. It is surprisingly little known that allied and partner governments and companies already contribute hundreds of billions of dollars in direct and indirect impact to our industrial base through the purchase of U.S. aircraft, ground vehicles, ships, radars and missiles. They also employ tens of thousands of American workers in U.S.-based subsidiaries producing products and providing services in states across the country, as well as participate in long-running collaborative development and procurement efforts such as the F-35 fighter aircraft, the NATO Sea Sparrow missile, and the P-8 Maritime Patrol Aircraft. A fact-based analysis of the industrial base impact of these contributions is long overdue. 

The first step to build off the White House report would be to clarify White House and Department of Defense guidance on the important benefits of allied and partner contributions to building U.S. national security capabilities. Improving guidance to acquisition professionals at all levels of the defense acquisition system, for example, would create more competition and, ultimately, more U.S. jobs. The Navy’s Future Frigate and the Air Force T-X Trainer are just two examples where non-U.S. firms have invested in the U.S. industrial base to win major programs. Additional partnerships in areas such as microelectronics, rare earths and robotics would likewise be beneficial to building industrial resilience in other areas.

The next step is to strengthen existing industrial base programs and initiatives to increase allied and partner participation. The National Technology Industrial Base (NTIB), for example, has been in place since the 2017 NDAA. While the NTIB has been very useful for government-to-government efforts in foreign direct investment, now is the time to develop and include NTIB clauses into DoD contract opportunities. Defense Production Act (DPA) Title III projects already include Canadian and American firms as domestic sources. Congress can change the definition of domestic source to also include the other NTIB countries, like Australia and the United Kingdom. Finally, the Industrial Base Analysis and Sustainment (IBAS) conducts important programs to build industrial base capacity but starts each year with an extremely modest base budget of $10 million. Expand that base budget to $50 million and create opportunities for NTIB-based firms to participate in the IBAS Other Transactions consortium, Cornerstone.

Unfortunately, the recently established Buy America office in the Office of Management and Budget is working to limit the so-called use of Buy America waivers. This cognitive dissonance confuses our closest partners and sends the wrong signal. Domestic industrial capacity and international industrial collaboration are mutually reinforcing — not competing — goods. Pursuing both goals is the right strategy and now is the time for action.

The result of these and similar efforts will be strengthened security partnerships, mutual economic benefit, and greater U.S. industrial base resilience. These powerful outcomes demonstrate that increasing industrial resilience with a little help from our friends is a truly win-win proposition.

Jerry McGinn, Ph.D., is the executive director of the Center for Government Contracting in the School of Business at George Mason University.

Tags Economies International Jerry McGinn Joe Biden Manufacturing supply chains

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