Supply Chains: Enhancing Resilience, Addressing Vulnerabilities

The COVID-19 pandemic revealed the critical nature of U.S. supply chains for a range of products, including some that are produced almost entirely domestically (e.g., meat) and some that are mostly imported (e.g., antipyretics). Dozens of bills as well as executive branch actions propose to address these vulnerabilities.

The Biden administration and Congress should work with the private sector to enhance supply chain resiliency and mitigate risks made evident by the pandemic. To achieve these goals, the first imperative is to get the facts straight.

To this end, the U.S. Chamber supported the measure in the CARES Act calling for the National Academies to issue a report on the security of the U.S. medical product supply chain to inform policymakers as they examine these issue. A misdiagnosis of these challenges could undermine U.S. pandemic response, disrupting both domestic and global supply chains and spurring foreign retaliation against job-sustaining exports.

Second, stopping COVID-19 is a global emergency, and attention should focus on addressing the pandemic first. Officials should not impose measures that will complicate immediate efforts to secure supplies of goods that are saving lives.

Third, officials should recognize that supply chain challenges do not lend themselves to a one-size-fits-all solution. For some products, stockpiling is key. For personal protective equipment (PPE), for example, the COVID-19 pandemic caused demand to rise 40-fold, causing widespread shortages. There is no question that these alarming shortages arose from this dramatic surge in demand and not from the particular geography of their supply chains. Indeed, pandemic preparedness experts have warned for years that governments should establish robust strategic stockpiles, and doing so should be a key goal for select products.

For other products, geographic diversity of supply is vital. The vast majority of pharmaceutical products have not suffered shortages during the pandemic, and in the United States, officials indicate that fewer than two dozen of the 20,000 FDA-approved products on the market are dependent on a single foreign source. Upholding diversity of supply from a wide range of geographic sources is a proven risk-mitigating tool that contributes to resilience, and officials should focus on ways to enhance it and to limit vulnerabilities where they exist.

For yet other goods, bespoke solutions are required. For example, some lawmakers cite antibiotics as a product where the United States is worryingly dependent on imports from China (at least for active pharmaceutical ingredients), yet the chief concern here is rising antimicrobial resistance (AMR): Indeed, many products such as penicillin are no longer effective. Further, the private sector has limited incentive to invest in R&D for new antibiotics because overuse erodes their efficacy, so new incentive systems are needed. U.S. pharmaceutical companies recently announced a new AMR Action Fund to invest nearly $1 billion to ensure a robust and diverse pipeline of new medicines to treat drug-resistant infections.

Finally, closing off trade opportunities entails serious costs and risks. It is imperative that government not take steps that risk cutting our economies off from major export opportunities that have long supported jobs in our countries. To illustrate, Europe is a giant export market for U.S. medical device manufacturers. If the United States imposes “Buy American” rules on these products, Europe will likely retaliate with “Buy European” rules—and American workers will lose out.

ACTION: The Chamber supports an incentive-based approach to fostering supply chain resiliency in which policymakers take time to fully understand supply chain vulnerabilities, avoid broad-brush approaches that are not suitable for all sectors, foster geographic diversity of supply, and avoid new trade barriers.