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The Competitiveness Agenda – A Help or Hindrance for Global Supply Chains?

Date: May 18, 2021

Everyone in Washington has opinions – about politics, neighborhoods, restaurants, sports, and the weather. And now it turns out that everyone has an opinion about a U.S. competitiveness agenda.
 
President Biden based much of his White House campaign on an agenda to restore jobs and manufacturing in the U.S. Although few elected officials disagree with the vision, there are wide differences on how to get there.
 

Key Takeaways

  • President Biden has used the power of his office and issued Executive Orders to further his vision of a stronger U.S. manufacturing base.

  • The Senate will take up legislation this week to provide additional funding to research and development in the U.S.

  • But . . . members of the Republican party and even Democrats in the House disagree with many of the program laid out in the Senate legislation.

  • At the same time, Democrats in both the Senate and the House are laying out “Buy America” and other similar programs.

  • What’s going to come across the finish line?

 

What I Am Watching For?

  • Will the Senate pass the “Endless Frontiers” legislation? We will know more this week.

  • What “Buy America” provisions will be added to the infrastructure legislation?

  • We are keeping a close eye on Biden’s trade agenda and the tools the President uses to address his vision.


Endless Frontiers

The Endless Frontier Act, sponsored by Senators Schumer (D-NY) and Young (R-IN) authorizes more than $100 billion over five years to boost research and development of innovative technology and manufacturing at colleges, universities, and other institutions and create a new entity within the National Science Foundation to focus on technology.

The package is being pushed toward passage on an aggressive timetable by Schumer. The fervor among Democrats and Republicans to counter China’s challenge to U.S. economic primacy has made the legislation, one of the few bills to draw broad support at a time when partisan divisions are running deep. Its fate also may serve as an indicator for other proposals, such as infrastructure, that have nominal bipartisan support. Last week the consideration of the bill in committee was often contentious and the ability to have it considered on the Senate floor is far from certain.

Yet, Senator Rubio is intending to amend the bill to expand oversight of research funds to include the U.S. intelligence community, requiring the Director of National Intelligence and other agencies such as the Federal Bureau of Investigation to certify that anyone receiving money authorized by the legislation is not susceptible to foreign threats. It also would prohibit people who have received financial or other support from the Chinese government from receiving funds authorized by the legislation, among other provisions.
If the legislation passes the Senate, it must then be considered in the House. But Democrats in the House have their vision of a competitiveness agenda and the final legislation will differ from the current bill under consideration.
 

Isn’t There a Semiconductor Section in This Bill?

Last week, the Senate Commerce Committee agreed to add the CHIPS Act to the Endless Frontiers legislation. The CHIPS Act authorizes $50 billion in funding for the manufacture of wafers and semiconductors in the U.S. The committee added an additional authorization for a $2billion program for legacy chips – including motor vehicle grade chips. As I write this on Monday afternoon, it is unclear if the $2 billion program will stay intact and even if money will be set aside for any of the programs.
 

What About the Section 301 Tariffs?

U.S. Trade Representative Katherine Tai has committed to re-examining an exclusion process for Section 301 tariffs on goods from China. Yet, she stopped short of committing to the elimination of the tariffs and is supporting continued talks with China on compliance with the agreement mapped out during the Trump administration.
 
And the Biden administration has yet to commit to any action to lift steel and aluminum tariffs even those imposed against our traditional allies.
 

What Else Is Being Considered?

The President sees “Buy America” as a tool to promote U.S. manufacturing. On January 25, the President issued an executive order creating a new director for “Made in America” and requiring the federal government to tighten its procedures on mandated U.S. content for federal purchases. The director is now in place and MEMA expects specified content requirements later this year.
 
In addition, the Biden administration brought a case against GM using new labor provisions under USMCA designed to assist in union organizing. The facility-specific rapid response labor provisions of USMCA were specifically added to strengthen union organizing in Mexico and provide great impetus to reshore jobs in the U.S. 
 
And Tai has made it clear that trade policy will continue to be used to strengthen the Biden agenda.  MEMA expects to see greater use of the rapid response system and efforts to include similar provisions in other trading agreements.
 

What Should Our Domestic Industry Do?

I know I sound like a broken record, but educate, educate, educate!  In any discussions with elected representatives, explain how the global supply chain makes the United States more competitive, providing more jobs and greater investment in this country. Use specific examples of how your company depends on a global supply chain and how your domestic suppliers benefit from this structure. MEMA will continue to focus on protecting U.S. competitiveness while assuring the ability of our goods to cross borders freely.
 
Without our input, the competitiveness agenda could weaken our economy. Let’s commit to working on these issues together.


 
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