The Biden administration continues to intensify its supply chain security policies. On Monday, Eastern Time, the White House unveiled a series of new plans, including the establishment of the "White House Supply Chain Resilience Committee." Co-led by the National Security Advisor and the National Economic Advisor, the committee encompasses nearly all cabinet ministers and over a dozen high-ranking officials involved in industrial decision-making, such as the Secretaries of Commerce, Defense, Energy, Public Health, Homeland Security, the Director of National Intelligence, and the U.S. Trade Representative.
The committee is tasked with conducting its first quadrennial supply chain review by December 31, 2024, and will regularly update the definitions and standards of key industries and commodities critical to U.S. national and economic security. Within 12 months of publishing the standards, the committee will review and update the list annually.
The Biden administration had already established a similar mechanism during the COVID-19 pandemic in 2021 - the Supply Chain Disruptions Task Force, led by the Secretaries of Commerce, Transportation, and Agriculture, aimed at addressing the mismatch in supply and demand of pandemic prevention materials. The new committee expands this scope further.
What do the new measures include?
In addition to establishing the new task force, the White House announced the activation of the Defense Production Act, a special act passed during the Korean War in 1950 to streamline production. The last time this act was used was in early 2021 during the COVID-19 pandemic to accelerate and expand the supply of personal protective equipment like ventilators.
This time, the act is primarily aimed at the pharmaceutical supply chain. The White House stated it would use the act to produce more essential medicines in the U.S. A specific measure is to expand the authority of the Department of Health and Human Services (HHS) to invest in domestic production of essential medicines, medical protective measures, and critical inputs deemed vital for national defense by the President.
Additionally, HHS has allocated $35 million for domestic production of critical raw materials for sterile injectable drugs. They will also appoint a new Supply Chain Resilience and Shortage Coordinator. HHS plans to institutionalize this coordination system.
The Department of Defense will soon release a new report on pharmaceutical supply chain resilience, aiming to reduce dependence on "high-risk foreign suppliers."
According to a report by the Atlantic Council in April this year, China has been a major supply source for American pharmaceutical factories. The report stated that since 2020, U.S. imports of Chinese medical resources, such as drugs, vaccines, blood, organic cultures, bandages, etc., have increased by 485%. The total import value in 2020 was $2.1 billion, surging to $10.3 billion in 2022.
Besides these measures, the White House announced nearly 30 other actions to enhance supply chain resilience. For example, the Department of Energy launched a $275 million Advanced Energy Manufacturing and Recycling Grant Program, focusing on investing in the clean energy supply chain, including the production of critical materials, grid-level batteries, electric vehicle components, onshore wind turbines, and energy-saving technologies.
Establishing new cross-government supply chain data sharing capabilities to improve monitoring and early warning capabilities. Under this framework, the Commerce Department has created the first Supply Chain Center, integrating industry expertise and data for analysis. The center is currently conducting in-depth analysis of the clean energy supply. They are also evaluating industrial and import data to help address foreign dependency vulnerabilities and fault points in critical drugs.
The Department of Transportation has also launched a public-private partnership project, "Freight Logistics Optimization Works" (FLOW), aimed at bringing together stakeholders in the U.S. supply chain to create a shared supply chain network, promoting more reliable goods movement.
The U.S. government stated that in addition to domestic production measures, it would also work internationally to strengthen global supply chains, including developing early warning systems with allies and partners. This includes the global sharing of climate observation information to minimize its impact on infrastructure, water, health, and food security.
Are supply chain issues causing high inflation in the U.S.?
The White House emphasized in its latest statement that high inflation in the U.S. is closely related to supply chain issues, showing a chart that supply chain pressure and inflation trends are basically consistent.
"When the supply chain is smooth, the prices of goods, food, and equipment will drop, leaving more money in the pockets of American families, workers, farmers, and entrepreneurs," the statement read.
Additionally, Biden hosted the first meeting of the White House Supply Chain Resilience Committee on Monday afternoon and called on businesses not to inflate prices in his speech. He indicated that even though inflation has already declined and the supply chain has been rebuilt, for those companies that have not yet lowered prices, it's time to stop inflating prices and give American consumers a break.
Biden also criticized the Republicans' plan to cut spending as an attempt to outsource jobs, while his administration is committed to producing and even exporting from the U.S. "We won't import anything other than what we manufacture. We produce here and then sell overseas, rather than going to the cheapest place we can find to make it."
The Biden administration believes that a robust supply chain is the foundation of a strong economy. Since taking office, he has made supply chain resilience a priority, launching a series of policies including the establishment of specialized task forces and passing acts such as the Chips and Science Act and the Inflation Reduction Act.
Contrary to the Biden administration attributing inflation to supply chain issues and the Russia-Ukraine conflict, some Republican lawmakers believe that the rise in U.S. prices is triggered by the $1.9 trillion COVID-19 relief package signed by Biden in 2021.
Economic issues, represented by inflation, are of utmost concern to American voters, and this is crucial for Biden's bid for re-election. Although inflation in the U.S. has eased over the past period, multiple polls show that the public still feels a heavy economic burden and is dissatisfied with Biden's economic management.
According to a recent Economist/YouGov poll, only 39% of American voters approve of Biden's economic management. Another poll by Reuters/Ipsos earlier this month showed that the economy has been the top concern for Americans over the past two years, with Biden's approval rating dropping to its lowest since April this year.
According to the latest statistics from Bloomberg, American households now need to pay nearly $120 to purchase goods and services that would have cost $100 before the COVID-19 pandemic. The price increase since early 2020 is comparable to the increase over the decade before the pandemic. Specifically, since January 2020, U.S. food groceries and electricity have risen by 25%, used car prices by 35%, car insurance by 33%, and rent by about 20%. The affordability of housing for the public is at the worst recorded level. Auto loan rates and credit card rates are also at their peak.
Jesse Rogers, an economist at Moody's, stated that Biden's latest series of initiatives is another important step in alleviating supply chain pressure. Although it is unlikely to solve some of the more complex issues plaguing the supply chain all at once, measures targeting pharmaceuticals, climate infrastructure, data security, and logistics will enhance resilience and promote intelligent infrastructure and global cooperation.
