Wednesday, June 29, 2022

AAM to Congress: Building Manufacturing Resiliency Will Require a Sustained Effort

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“We must break the vicious cycle of implementing policies that reward imports over domestic production,” Scott Paul tells the Senate Finance Committee.

Summer is arriving, and in some corners of the country it’s hard to get your air conditioner fixed because components for residential units aren’t widely available. But there also aren’t enough tampons. They can’t get magazines printed on time. And Boeing’s airplane production line is on perennial backorder.

Ladies and gentlemen: It’s been two years since the pandemic laid all of these production problems throughout the U.S. economy bare, and supply chains remain a problem.

So what’s Washington going to do about it? Lawmakers have a role to play here – they are, for instance, about to lean heavy on the container shipping industry in an effort to ease up bottlenecks at ports, which they hope will help ease the inflation problem. But while some worry about the world’s slight new skepticism toward the theory of comparative advantage and the dent that it’s going to put in profit maximization, others have pointed out that layering Ricardian economics onto the modern world isn’t a neat and tidy fit. The world’s second largest economy doesn’t live up to the international standards of the World Trade Organization. Many of the world’s production supply lines run through that country, and the United States remains one of its biggest customers. The moment is calling for a buildout of industrial resiliency.

That was the point Alliance for American Manufacturing (AAM) President Scott Paul made before a Senate Finance Committee hearing examining supply chain resiliency problems.

“The pandemic has exposed in rather dramatic fashion that years of flawed tax, trade, procurement, and other economic policies have put the United States in a perilous position of over-dependence on imports,” Paul told the hearing. “We recognize that the United States has important security and trade relationships with our allies, and we can and should utilize those where it makes sense. But our vulnerabilities reflect an outdated notion of the benefits of hyper-globalization, where our consumers, workers, domestic businesses, and our national security suffer.

“We must break the vicious cycle of implementing policies that reward imports over domestic production.”

AAM has some ideas on how do that, and many of them start with passing the Bipartisan Innovation Act.

But no bill is perfect, and there are specifics in that bill that we’d like to see included. Paul went into detail before the subcommittee hearing but, broadly outlined, AAM is calling for investments in crucial industries (the CHIPS Act); attention paid to improving trade enforcement tools (the Leveling the Playing Field 2.0 Act); an outbound investment review process so that critical production capacity isn’t sold off to foreign adversaries (the National Critical Capabilities Defense Act); a supply chain resiliency fund that conditions its loan guarantees on domestic production; and reforms to the de minimis threshold so huge online retailers – you know who we’re talking about – can’t use a loophole to skirt import tariffs (the Import Security and Fairness Act).

We’d also like to see the effort to use this bill as a vehicle to roll back tariffs on Chinese imports dropped, and we’d like to see the Build America, Buy America Act — passed along with the Bipartisan Infrastructure Law last year — be fully implemented so we are maximizing the economic benefits of domestic procurement rules.

When lawmakers encourage domestic production by passing policies like these, Paul told the subcommittee, domestic industry responds positively:  

Senators, a brighter future for supply chains and manufacturing is possible. We see examples of where public policies have invited new investments over the past several years, and I cite many of these in my written testimony. Just a generation ago, some economists predicted none of this — large new factories or surges in manufacturing jobs — would ever be possible again due to automation and import competition.

But we should not pretend that a brief focus on supply chains alone will build on this momentum. It must be a sustained effort.

You can watch the entire hearing here, and read Paul’s testimony here.

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