U.S. Chamber Comments on Promoting Supply Chain Resilience

The U.S. Chamber on April 22 filed comments responding to the Federal Register Notice issued by the Office of the U.S. Trade Representative on “Promoting Supply Chain Resilience.” The comments are expected to inform objectives and strategies that advance U.S. supply chain resilience in trade negotiations, enforcement, and other initiatives, per USTR. In connection to this submission, Senior Vice President and Head of International John Murphy will also testify before the U.S. International Trade Commission on May 2.

The following are Murphy’s brief oral remarks summarizing the written comments:

The U.S. Chamber of Commerce is the world’s largest business federation, representing the interests of companies of every size, sector, and state. Consequently, our members’ our interests in international trade, investment, and supply chains are broad and deep.

As laid out in our detailed comments, the Chamber is a strong defender of the substantial benefits of international trade to the American people and a forceful advocate for a more forward-leaning trade agenda that includes the negotiation of additional market-opening trade agreements.

With regard to trade and supply chain resilience, it is critical to correct common misperceptions and misdiagnosis of many of the supply chain challenges of recent years.

First, the diversified sourcing options provided by open trade can make economies more resilient.

In recent years, a wide variety of product markets where demand is almost entirely met by domestic production have been subject to disruption.

Infant formula, nitrogenous fertilizer, and eggs are examples of products where domestic production was meeting almost the entirety of domestic consumption, and yet disruptions occurred. These examples show that autarky does not guarantee resilience.

Second, shortages caused by an unusual surge in demand cannot be mitigated through “onshoring.”​

To illustrate, the U.S. International Trade Commission (ITC) issued a report in December 2020 on that found U.S. production of N95 masks accounted for “roughly 80 percent of the U.S. market” prior to the pandemic.

In other words, production for this particular product was never sent “offshore.” Rather, painful shortages arose because the pandemic caused demand to rise 40-fold.

Such a difficult-to-address surge in demand was both foreseeable and foreseen in decades of pandemic preparedness plans, which advised that the only way to get ahead of a prospective shortage would be to stockpile key products in advance, an endeavor that was never well funded.

For many other products, a Covid-19-era “demand surge” arose largely from the $6 trillion in supplemental U.S. government outlays to state and local governments, households, and businesses — enacted by Congress during the Trump and Biden administrations.

This support caused U.S. spending on durable goods to surge to a level 25% higher in 2021 than two years earlier. This was an unprecedented surge in demand. While production of goods ranging from semiconductors to white goods actually expanded briskly, industry simply could not keep up with the breakneck expansion in demand fueled by government outlays.

Public policy must grapple with the challenge of devising public policies to address shortages driven by an extraordinary increase in demand that outpaces even rapidly growing supply. However, those solutions will be unsuccessful if they erroneously identify broken production chains as the culprit.

Third, supply chain resilience based on “nearshoring,” “friend-shoring,” or “ally-shoring” should not rely on a too-narrow list of countries.

Just as reliance on a single foreign source for critical inputs can obviously be a vulnerability, relying on only a few may be less than optimal.

To this point, WTO Director-General Dr. Ngozi in January 2023 commented: “When people talk of friend-shoring, I get a little nervous because I don’t know who is a friend... When you say that, I never hear any countries in Africa mentioned.”

The U.S. business community certainly agrees with this perspective. Given that 95% of the world’s consumers and 80% of its purchasing power lie outside the United States, American companies are keen to strengthen their trade and investment ties across Africa, the Americas, Asia, Europe, the Middle East, and Oceania.

While obvious “unfriends” such as state sponsors of terrorism stand out, the list of countries where U.S. commercial and other interests are well served by strengthening these ties is long.

In our detailed comments, the Chamber outlines additional information on the extremely varied realities before sectors such a biopharmaceuticals, critical minerals, and semiconductors.