A plan to secure America's supply chains

A plan to secure America's supply chains
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Supply chains — once the esoteric concern of inventory specialists and shipping companies — have emerged over the past year as a crucial and disconcertingly fragile link in global commerce. The White House and Congress, recognizing that the sinews of America’s economic vitality and national security have become increasingly stressed, have pursued parallel efforts to better understand and address vulnerabilities in the country’s critical supply chains.

In March, the House Armed Services Committee stood up the Defense Critical Supply Chain Task Force, and gave the bipartisan committee three months to formulate legislative proposals that could be folded into the 2022 National Defense Authorization Act, or NDAA. The task force’s efforts culminated in a final report, released last week, that offers actionable recommendations for the Defense Department to secure America’s defense supply chains, and lessen reliance on adversarial manufacturing for critical supplies.

The task force’s mandate was three-fold: understand the Defense Department’s processes for analyzing supply chain risk; determine how the Pentagon prioritizes and mitigates identified risk; and offer recommendations that Congress and other relevant agencies can implement to “help build resilience against future shocks to the supply chain” both in the short and long term.

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The report lays out six overarching recommendations as legislative proposals for inclusion in the NDAA. These recommendations include statutory requirements for supply chain risk management, auditing, and diversification, bolstering relevant human capital, enhancing international partnerships, and enacting a comprehensive rare earths supply chain strategy. These recommendations are sensible and would be logical additions to the next NDAA.

The task force went further and made additional recommendations for Congress and the White House to consider. One pertains to the Defense Production Act, or DPA, a once-obscure law that provides presidential authorities to speed up and expand the supply of materials and services by private industry to bolster national defense. In the early months of the pandemic, the Trump administration used the DPA to prioritize the manufacturing of critical medical supplies, such as ventilators and N95 masks, and to limit the export of personal protective equipment, or PPE.

The task force calls on the White House and Congress to consider a series of recommendations to bolster the Pentagon’s DPA authorities, including boosting appropriations, removing spending limits for individual shortfalls, and permitting the transfer of funds into the DPA from other agencies to speed up reaction times during a crisis.

Congress, however, should go even further.

DPA can serve as a bellwether for supply chain risks by routinizing industry surveys, an ideal vehicle for providing up-to-date data on critical industries, materials, and technologies to government and the private sector. Congress should also expand the scope of the DPA by establishing a Title III office under the Commerce Department. Title III of the DPA provides the executive branch with the authority to use incentives — loans, loan guarantees, and purchase commitments, among others — to ensure timely availability of inputs needed for U.S. national security and defense. Currently, the Defense Department is the only federal agency with the capability to execute Title III authorities. A Title III office under the Commerce Department could focus on projects related to economic or technological competitiveness, while the Defense Department continues to oversee military and defense-related projects.

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The task force also cites the need to partner with allies on novel approaches to supply chain resilience, such as with multilateral production and surge capacity agreements. There is a commendable emphasis on “ally and friend-shoring” throughout the report. This dovetails with Biden administration efforts to tackle supply chain concerns with Japan and South Korea bilaterally, with the countries of the Quadrilateral Security Dialogue, and with the European Union via the Trade and Technology Council. Scaling and implementing these agreements will require creating new bureaucratic connective tissue. To do so, Congress should authorize the creation of the proposed Technology Partnership Office at the Department of State to facilitate multilateral efforts to diversify and secure key supply chains.

Supply chain vulnerabilities are a central component of the global technology competition. How the U.S. government identifies and addresses these risks — security, lack of vendor diversity, fragility, reliance on materials and technology from adversaries — will have an outsized impact on America’s long term economic competitiveness, political power, and military might. 

The road ahead is difficult: threading the needle on free market principles and government intervention in the economy; striking the balance between self-reliance and international partnership; and calibrating between investments in proven capabilities and possible game-changing innovations. The task force’s efforts, alongside ongoing initiatives within the Biden administration, represent an important first step, however, in determining how best to secure U.S. supply chains. This work is more critical now than ever.

Martijn Rasser is the Senior Fellow and Director of the Center for a New American Security (CNAS) Technology and National Security Program. Megan Lamberth is a Research Associate for the Technology and National Security Program at CNAS. They are the authors of the CNAS report, “Taking the Helm: A National Technology Strategy To Meet the China Challenge.”