Last month, President Joe Biden came to Michigan to push America to take leadership in electric vehicle manufacturing-or risk ceding economic leadership in the automotive industry and other areas to China. In doing so, the President opened the prospect of more well-paying domestic jobs and the reconfiguration of our supply chains in mobility and other sectors for domestic production.
We need more domestic production and more well-paying jobs that go with it, but we won’t do it alone. This is because rotating supply chains at home is not always realistic; we rely on components and materials from many parts of the world. There is a better way forward, and it starts by selectively looking at our business and co-production relationships with friends and allies we trust – what we call “ally-shoring. “
In announces its strategy for supply chain resilience, Biden’s White House recently adopted allied shoring as the most realistic and effective way to ensure that America’s supply chains are never as vulnerable as COVID-19 has revealed. It is also the best way to rebuild our economy and that of our friends, which strengthens the health of all of our democracies. Additionally, working together to rewire supply chains and co-produce high-tech products in emerging sectors will serve to rebuild damaged alliances and US global economic and political leadership, as well as verify the attempted China to extend its own authoritarian economic and political model across the globe.
One of the reasons Allied Offshoring makes so much sense is that in the auto industry and others, we don’t engage in “trade” so much as we manufacture things with other countries. This is particularly true in our automotive and mobility sector. Almost 50% of the so-called “trade” of the Midwestern states is done with Canada and 30% with Mexico. More than half of this North American trade and 37% of our trade with EU allies concerns intermediate goods, that is, the building blocks of a finished product. This reality of “co-production” will be true for electric vehicles as well as for other emerging mobility products, such as the AI-Controlled Robot Delivery Vehicle Now ‘Trained’ on Streets of Ann Arbor, Michigan.
With the disruption of COVID-19, it’s understandable that many of our leaders are offer onshoring critical supplies. But as attractive as it sounds, it’s not an effective way to win strategic competition with China. A relocation push would not only irritate our allies, but would also be problematic for American companies (including our automakers) who wish to continue doing business in foreign markets and using foreign-made components in their products. It would also be impractical and incredibly expensive. With sophisticated, computer-based products like cars and phones incorporating dozens of components from around the world at the lowest possible cost, no one could afford to buy one that was made only domestically. Even trying to land many supplies would reduce our influence on the world stage. Alliances also have advantages, especially when they are in the midst of a global strategic standoff for primacy between autocratic and democratic political systems.
Ally-shoring is a much better choice. This means deliberately sourcing essential materials, goods and services from countries that share our democratic values and our commitment to an open, transparent and rules-based international economic and trade regime. Many countries would rather work with the United States than with China and its development approach to dependency and corruption, including lower cost producers such as Mexico, Vietnam, India and other developing world economies which are essential to maintain profitable supply chains and where we can work together to strengthen strong institutions, a level playing field for manufacturers and chains transparent procurement.
Offshoring of allies increases the reliability of critical supply chains while reducing dependence on China and other state actors who will seek to continue to use this dependence to undermine U.S. relations Rework to promote the partnership with countries that share our values and interests would reduce our vulnerabilities while maintaining access to a wide variety of goods and markets for American businesses and consumers.
The Biden administration critical review of the supply chain– which is due to arrive soon – could encourage Allied shoring. The Senate could also help the country turn to allied shoring, by adopting the Innovation and Competition Law of 2021. This sprawling legislation includes multiple provisions on supply chain resilience and competitiveness, including a “strategic competition law” that talks about “prioritizing” alliances and partnerships. More, current legislative efforts by the Helsinki Commission – a bipartisan group of US lawmakers committed to fighting foreign corruption, kleptocracy and authoritarianism – further strengthen democratic principles and standards of good governance around the world, thereby strengthening the foundations of long-term economic security.
If the United States takes action in favor of alli-shoring, it would be a powerful lever to put democracy at the heart of our foreign policy (as many request) given the aggressiveness of China and Russia in trying to dominate authoritarianism. Besides tackling rogue actors, we can focus on strategies that strengthen strong democratic governance. The deliberate refocusing of trade relations, production, distribution and supply networks with countries that accept standards of openness, rule of law and democratic governance will help turn the tide of leaders, norms and undemocratic practices.
Perhaps most importantly as we rebuild the national economy ravaged by the pandemic, the relocation of allies would also help create new economic opportunities and create more good jobs here at home, including where they are most. needed, like the industrial Midwest. To understand how Allied offshoring can help increase production and create new jobs in the United States, look no further than when supply chains were initially cut. As the country worked frantically to find or manufacture ventilators, masks and medical equipment, it turned to domestic manufacturers with global supply chains and production capabilities – many of whom are headquartered here. Companies like General Motors have converted sophisticated facilities and extensive networks in the Midwest and Mexico to answer the call. The Ford Motor Company quickly followed suit.
Ally-shoring is an important tool in accelerating our economic recovery and helping to realize the President’s commitment of a “Foreign policy for the middle class”. Rethinking our industrial and domestic employment “base” is central to providing more opportunities to Americans and rebuilding a strong and prosperous middle class. Reshaping our supply chains can also go a long way in restoring US global leadership and strategic alliances, protecting and strengthening democracy, and controlling the bad behavior of China (and other authoritarians), all at once.