ILMA Compoundings - Jul/Aug 2021 - 34

WASHINGTON LANDSCAPE
100-Day Supply Chain
Report
By Matthew Levetown
P
resident Joe Biden promised to
make supply chain issues a key
part of his term in office, from
responding to short-term disruptions
to building long-term resilience. In
late February, the president signed
executive order 14017, which identifies
four " critical supply chains " for
government agencies to review within
100 days: pharmaceuticals; critical
minerals and materials; large capacity
batteries; and semiconductors. Along
with these critical supply chains,
the order identified other essential
supply chains for review by February
2022, including the defense and
transportation industrial base. Given
the cross-industry roles that ILMA
members play, there will be many
opportunities for members to contribute
to the Biden administration's
development of U.S. supply chain
resilience strategies.
The 100-day critical supply chain
review report was published in early
June, and it identifies existing and
future risks to supply chains, as well
as providing general multipronged
recommendations to protect U.S. manufacturing
capacity. For example, in the
review of large-capacity battery supply
chains, the federal agencies recommend
expanding manufacturing while investing
in new battery and metal extraction
technologies to reduce the risk of
disruption. The cross-departmental
report includes several suggestions to
revitalize American manufacturing
through expanded apprenticeship
34
programs, innovation and investment
in expanded domestic capacity. According
to the report, a key requirement to
establishing robust and resilient supply
chains will be investment in small and
medium-size manufacturers as both
producers and innovators.
Unsurprisingly, the report is filtered
through the lenses of sustainability
and equity in both its analyses and
recommendations. Some of the analyses,
including critical minerals and
batteries, are primarily forward-looking
on expanding the market share of
electric vehicles, automation and green
technologies. Responding to Biden's
2050 net-zero climate pledge, the
report cites a statistic published by
the International Energy Agency: by
2040, demand for critical minerals
such as lithium is expected to grow
sixfold to meet governmental climate
pledges. In particular, to the extent
that metals like lithium are used by
ILMA members to produce greases
or other lubricants, federal backing
of electrifying vehicle fleets and
renewable energy poses a future supply
challenge without concurrent expansion
of mining.
While there is nothing inherently
wrong with sustainable industry, one
foreseeable risk to an overemphasis
on ecological and social issues in
supply chain development is identified
in the report itself - competing
with low-cost and low-regulation
industries abroad. To compete with
foreign strategies such as " pumping
JULY/AUGUST 2021 | COMPOUNDINGS | ILMA.ORG
and dumping " (i.e., the flooding of
markets with subsidized and cheap
products), the report includes direct
and indirect mechanisms to combat
shifting investment abroad and protect
American manufacturers.
The most prominent direct tool is
the development of a strike force led by
the U.S. Trade Representative (USTR),
which would increase enforcement and
pressure against foreign unfair trade
practices and monitor trade threats to
supply chains. One area the USTR is
likely to focus on is government-backed
intellectual property theft. In the case
of China, in particular, the obligation
for foreign businesses to turn over
intellectual property, which often leads
to copying and market-flooding,
was an issue recognized by the Trump
administration. Biden's USTR discussed
intellectual property issues at
the first meeting with Chinese trade
officials, and U.S. tariffs have been
maintained on many Chinese imports
as leverage. The report notes that
without the development of diverse
supply chains, China maintains a
strong bargaining position for single-source
supplies. Trade deals with
international allies with common
political and economic systems are
suggested several times throughout the
report. One possible ramification could
be the development of an international
" preferred country " treaty, similar to
the United States-Mexico-Canada
Agreement, reducing trade barriers to
encourage the sale of raw materials to
signatory countries.
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