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U.S. To Address Supply Chain Issues That Were Exposed By The Pandemic

RACHEL MARTIN, HOST:

Have you tried to buy a new car recently? If so, you know your options have been limited. Carmakers have had to dramatically scale back production because of a global shortage of semiconductors. It's just one supply chain disruption that prompted the Biden administration to take action. This morning, the White House announced the results of a review of four key sectors - semiconductors, pharmaceuticals, large capacity batteries and minerals.

On the line with us now, Brian Deese. He's the director of the National Economic Council at the White House. Brian, thanks for being here.

BRIAN DEESE: Happy to be here.

MARTIN: What does the administration see as the primary dangers to the U.S. supply chain right now?

DEESE: Well, the results of this review are pretty clear. The first is that having resilient supply chains is essential to national security, economic security and our technological competitiveness. And while the pandemic exposed weaknesses in those supply chains - we all remember the lack of personal protective equipment, the widespread shortages that we have seen and continue to see as the economy is now turning back on - the root cause of this is years and decades in the making, including underinvestment and lack of focus on understanding that things down at the end of the supply chain can cause big problems economically and in terms of our national security if we don't take a holistic approach. So the bottom line for us is that we need to be much more focused on understanding where those vulnerabilities exist and investing over the long term in building our capacity, both domestically and working with allies and partners, to reduce those vulnerabilities, whether that's in health care or in computer chips or in critical minerals for our national security.

MARTIN: So let's talk about what boosting production would look like. I mean, we mentioned the semiconductor shortage. These are the computer chips that are in everything from computers to cars, kitchen appliances. The majority of the world's semiconductor chips come from Taiwan, right? This plan suggests that increasing U.S. production is important. How do you do that?

DEESE: Semiconductors is a great example here. In fact, a lot of the underlying technology that has powered the semiconductor - the computer chip industry globally was invented in the United States. And 30 years ago, the United States was a leader, not just in inventing computer chips but actually producing them as well. But we've seen over time - in the '90s, we had nearly 40% of global production. That's now fallen down to close to 10%.

So there's no quick immediate fix. But the answer is to have a dedicated focus on building domestic capability to both invent and innovate, but also produce these computer chips here at home. So we've laid out a strategy. We're working with Congress on that to try to make a big investment in building that industry and the resilience of that industry domestically.

MARTIN: I mean, that's going to take a long time, right? What do you do in the short term?

DEESE: Well, it's going to - it doesn't take as long as you think. First of all, we need to get started immediately. And the good news is that there is bipartisan legislation that is moving through that may actually get a vote in the Senate today to invest more than $50 billion in building that domestic industry and the research and development necessary here at home. We start that now, we're going to start to see the impact of that over the next 12, 18, 24 months.

In the immediate term, we are working closely with our allies, including the Taiwanese government, including governments around the world, to make sure that U.S. consumers of those chips are not put at a competitive disadvantage as we move through this process of the economy turning back on, demand coming back. And there are going to be - continue to be some disruptions. But we're working very closely with our industry, with our auto companies, to try to make sure that we can weather this period as best we can, while we make the investments to make sure we're not put in this position again.

MARTIN: Can we talk about the larger geopolitical effects of all this? I mean, you mentioned Taiwan. Yesterday, Secretary of State Antony Blinken said the U.S. is pursuing talks with Taiwan about a possible bilateral trade agreement. Presumably, that would ease the semiconductor shortage, but China is going to see it as a threat. And doesn't that create different economic problems for the U.S.?

DEESE: Well, our principal focus here is looking at our domestic economic resilience and our domestic economic strength. We want to make sure that the U.S. economy and our own economic strength is never put at the kind of risk and the kind of threat that we were put during the pandemic. So that's first and foremost. Some of that is going to mean building more domestic capacity. We just talked about building actual capacity - produce semiconductors here in the United States.

But a big part of that is going to be - it would neither be feasible nor advisable for us to reshore all supply chains to the United States. So part of our strategy is a much more dedicated focus on working with partners and allies around the world to make sure that we have access to the products and access to the products from countries that share our values and share our economic systems. And so that's going to be a big priority for the administration, for the president, for the secretary of state. And it will be integral to a foreign policy that is centered on the idea of helping middle-class families and middle-class workers.

MARTIN: Are you going to use tariffs?

DEESE: Well, what we've said all along in this process is we want to use all the tools at our disposal. So, for example, today our Department of Health and Human Services announced that they will use something called the Defense Production Act to actually invest in the domestic production of essential medicines and APIs, those elements that we found we were woefully short on during the pandemic. That's a tool that we have at our disposal. We're going to use it.

We're also going to look at the trade rules and the trading system and try to identify where unfair competition by competitor nations has actually contributed to the vulnerabilities that we see on our supply chain. One of the things we're also announcing today is the establishment of a trade strike force. Our USTR, Katherine Tai, will lead that work. And we'll look at some places, for example, in high-capacity magnates where we believe that unfair competition has actually undermined our ability to access goods that we need for our national security.

MARTIN: I mean, that was part of the Trump administration's argument, too, wasn't it? And they then explored and used heavy tariffs as a tool.

DEESE: Well, I think that I would draw a pretty significant distinction here. What we're doing is taking a detailed look at supply chain vulnerabilities and trying to identify where, as part of an overall economic strategy, we need to use these different tools to make sure that we are not facing unfair competitive advantage. So we're going to work with our allies, work with our partners.

But there's a holistic strategy here, which is where we have supply chain vulnerabilities, we are going to work. We're going to act. We're going to use all the tools at our disposal. That's a pretty different approach. But our goal is very clear, which is we can't have the kind of vulnerabilities that, frankly, have been exposed over the last couple of years under the prior administration. Notwithstanding their approach to tariffs, they left the economy greatly exposed to these types of supply chain vulnerabilities.

MARTIN: Brian Deese is the director of the White House's National Economic Council. We appreciate you taking the time. Thank you.

DEESE: Thank you.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.