With the disruptions of COVID-19, it is understandable that many of our leaders started proposing the “onshoring” of critical supplies. But onshoring — as attractive as it sounds — is not an effective way to win the strategic competition with China. A push prioritizing onshoring would not only irk allies but also be problematic for U.S.-based companies (including our automakers) who want to keep doing business in foreign markets and use foreign-made component parts in products.
It would also be impractical and impossibly costly. With sophisticated products like cars and iPhones integrating dozens of components from around the globe at the lowest cost possible — no one could afford to buy a solely-domestically made one. Even attempting to on-shore many supplies would reduce our influence on the world stage. Alliances have benefits too, particularly when in the middle of global strategic tug of war for primacy between autocratic and democratic political systems.
Ally-shoring is a much better choice. It involves deliberately sourcing essential materials, goods and services with countries we can trust, and who would prefer to work with the US than China — including lower-cost producers like Mexico, Vietnam, India and other developing world economies. Working with these is essential to keep supply chains cost-efficient and reinforce strong institutions, a level playing field for manufacturers and transparent supply chains.
Ally-shoring would be an invaluable tool in putting democracy at the heart of U.S. foreign policy given the aggressiveness of China and Russia in trying to make authoritarianism dominant. Purposeful recentering of trade relations, production, distribution and sourcing networks with those who agree to standards of openness, rule of law and democratic governance will help reverse the tide of anti-democratic rulers, norms and practices.
Perhaps most important at a moment of national focus on rebuilding a COVID-19 ravaged domestic economy, ally-shoring would also help bring new economic opportunities and create more good jobs here at home, including where they are needed most, like the industrial Midwest. To understand how ally-shoring can contribute to an increase in production and grow new jobs in the US, look no further than when supply chains were initially cut.
As the U.S. worked frantically to find or make ventilators, masks and medical equipment, it turned to domestic manufacturers with global supply chains and production capabilities — many headquartered right here. Companies like General Motors converted sophisticated facilities and extensive networks in the Midwest and Mexico to answer the call. Ford quickly followed suit.
In early June, the report from the 100-day review President Biden ordered in February to address vulnerabilities in US critical supply chains will come due. If done right, the supply chain review recommendations will support an ambitious economic recovery and help make the president’s pledge of a “foreign policy for the middle class” a reality.
Rethinking our domestic industrial and jobs “base” is at the heart of delivering more opportunity to Americans, rebuilding a strong and prosperous U.S. middle class.
Reworking our supply chains right can also be a powerful contributor to restoring U.S. global leadership, rebuilding bruised alliances, protecting democracy and checking China’s (and other authoritarians’) bad behavior — all in one fell swoop.
Elaine Dezenski is a senior adviser at the Center on Economic and Financial Power at the Foundation for Defense of Democracies, and chief growth officer at Blank Slate Technologies. John Austin directs the Michigan Economic Center, and is a nonresident senior fellow with the Brookings Institution and the Chicago Council on Global Affairs.