Tai on trade and supply chains

Yesterday Ambassador Katherine Tai, the US Trade Representative, spoke to the Open Markets Institute. It is worth reading the full speech. Following are a few excerpts especially relevant to Supply Chain Resilience.

… our global supply chains, which have been created to maximize short-term efficiency and minimize costs, need to be redesigned for resilience.   Because resilient supply chains are vital for greater national and economic security. By this, we mean production that can more easily and quickly adapt to and recover from crises and disruptions.  It means having more options that run through different regions. But getting there requires a fundamental shift.  A shift in the way we incentivize decisions about what, where, and how we produce goods and supply services...

Let me unpack this a bit more.  I want to start with critical minerals.  The underlying problem is clear—we are dependent on a range of critical minerals and materials for products we use every day, everything from engines to airplanes to defense equipment. Demand for many of these metals is projected to surge over the next two decades, especially as we work to achieve net-zero greenhouse gas emissions by 2050; but the PRC already controls more than half of global mining capacity and 85 percent of refining.   Those are vulnerabilities—or in the terminology of competition policy, “chokepoints”—that we need to address and break.  And we are working with Congress, stakeholders, and partners to develop responses that help foster the kinds of supply chains we want to see for clean energy products—like commitments on export duties, non-market policies, best practices on investment screening, and labor rights...

The more concentration of capacity, the more risk is pooled. The more diverse and dispersed production, distribution, and demand capacity, the less our risk of catastrophic consequences.


June 18 Update: Two pieces of related journalism. In today’s Financial Times (online) Rana Foroohar comments favorably on Ambassador Tai’s speech and offers three “conclusions” for our shared consideration. Then, the lead front page story in the Sunday New York Times is headlined, “Failures of Globalization Shatter Long-Held Beliefs” (in the newspaper) while online is titled, “Why It Seems Everything We Knew About the Global Economy Is No Longer True“. Included is reportage resonant with Tai’s remarks. Such as, ““Our supply chains are not secure, and they’re not resilient,” Treasury Secretary Janet L. Yellen said last spring… Economic networks, by their very nature, create power imbalances and pressure points because countries have varying capabilities, resources and vulnerabilities… The extreme concentrations of critical suppliers and information technology networks has generated additional choke points.”