In One Sentence

• The Biden administration is developing “sustainability standards” for critical materials and minerals within U.S. supply chains.
• A new World Bank report cautioned on global income loss if countries worked to reshore production. 
• President Biden raised the domestic content threshold for “Buy America” rules, increasing sequentially to 75% in 2029. 
• U.S. lawmakers disagreed about whether or not to support electric vehicle production within the U.S. 
• Business groups are calling for an extended transition period before full implementation of the Uyghur Force Labor Prevention Act.

Mark the Essentials

• Following initial efforts on microelectronics, the White House plans to adopt comprehensive sustainability standards for essential minerals in strategic industries such as automotive and aerospace, steel and energy. 
• According to the Bank’s report, countries that benefit the most from increasing global supply chain integration include Thailand, Malaysia, Turkey and Vietnam. 
• The White House is also looking at further “Buy America” rulemaking for semiconductors, pharmaceuticals and advanced batteries. 
• Republicans argue that an uptick in electric vehicle production increases U.S. dependence on components and materials produced in China. 
• Several industry groups recommended a transition period of at least a year to allow companies to refine their due diligence programs, while others called for more clarity and transparency in the evidentiary standard.

Keeping an Eye On…

• Under its “Build Back Better” agenda, the Biden administration has sought to chart an ambitious program of “strategic industrial policy” investments in U.S. industrial capabilities. This agenda envisages a range of interventions in American hard and soft infrastructure that can support jobs and employment, sharpen America’s competitive edge, and avoid shortages of critical products. The resilience of supply chains is one of five core pillars of the administration’s 21st century industrial policy, the other pillars being targeted public investment, public procurement, building climate resilience, and advancing equitable outcomes. The administration has wasted no time in pursuing its supply chain goals, rolling out a number of initiatives in the areas of semiconductors, critical materials and minerals, and large capacity batteries. Federal procurement preferences to pull forward demand in new clean energy products have also been thrown into the mix. More initiatives are planned later this year, including domestic summits that aim to align regional economic development strategies with the administration’s national supply chain strategy. There are apprehensions within the business community though that the supply chain resilience agenda—framed as it is in the context of the administration’s “extreme [strategic] competition” approach towards China—will accelerate the drift towards decoupling and perhaps even towards protectionism. At minimum, the emphasis on ‘reshoring’, near-shoring’ and ‘friend-shoring’ of supply chains, it is feared, will begin to reverse the forces of globalization and place many Asia-Pacific nations that have hitherto been staunch advocates of globalization and ‘open regionalism’ in a dilemma: Do they join Washington’s ‘friend-shored’ but ‘Beijing-decoupled’ supply chain or should they continue to place their regionally-integrated trade policy eggs in the China basket?

Expanded Reading

• The U.S. Is Racing To Reduce Its Rare Earths Dependence On China, OilPrice.com, March 14, 2022
• US-China Business Council Comments Regarding Enforcement of the Uyghur Forced Labor Prevention Act, US-China Business Council, March 10, 2022
• Amid record gas prices, lawmakers divided over US energy future, The Hill, March 8, 2022
• Hearing: “Charging Forward: Securing American Manufacturing and Our EV Future,” Subcommittee on Energy (House of Representatives Committee on Energy and Commerce), March 8, 2022
• Biden announces strengthened Buy American rule to help boost domestic manufacturing as he touts February job numbers, CNN, March 4, 2022
• FACT SHEET: Biden-⁠Harris Administration Delivers on Made in America Commitments, The White House, March 4, 2022
• Reshaping Global Value Chains in Light of COVID-19 : Implications for Trade and Poverty Reduction in Developing Countries, The World Bank, March 4, 2022
• FACT SHEET: Biden-⁠Harris Administration Announces Supply Chain Disruptions Task Force to Address Short-Term Supply Chain Discontinuities, The White House, June 8, 2022