June 22, 2020
As countries across the globe slowly begin the recovery from COVID-19,while also bracing for a possible second wave, efforts to strengthen domestic manufacturing here in the United States are growing in popularity. Right now, U.S. companies need our support, but this should not be done through draconian mandates that will jeopardize U.S. supply chains, leaving consumers out to dry and exacerbating the current crisis instead of alleviating it.
Current “Buy American” proposals under consideration by lawmakers claim to be national security measures prioritizing American independence from potentially malicious foreign actors. To accomplish this goal, proponents advocate for an increasing share of manufacturing operations across myriad industries to be brought back home to the United States. In reality, these misguided proposals not only misread the current state of play for American global supply chains, but risk a catastrophic domino effect by throwing a wrench into well-established and critical supply engines. This would lead to shortages, higher prices, and lost jobs—all during the worst health and economic crisis in recent history.
Understandably, medical supply chains are of particular interest to policymakers at this juncture. But as it stands, the United States is already the center of global medical innovation, and we also possess strong domestic manufacturing operations and a diverse portfolio of partnering countries that contribute to our overall output. According to the U.S. Chamber of Commerce, U.S. production of medical equipment meets 70% of total domestic demand, and nearly the same percentage of finished medicines consumed in the United States are manufactured at home. Further, nearly 28% of facilities that manufacture active pharmaceutical ingredients (APIs) for domestic consumption are located in the United States, while 26% are in the European Union (EU), 18% in India, and just 13% in China.
It is critical that our leaders understand how interconnected global supply chains are and how long they took to establish. In most cases, they took decades to come together, and these simply cannot be undone overnight without significant ramifications.
Building new medical manufacturing facilities has a price tag almost in line with research and development (R&D) expenses for new medicines themselves—up to ten years and nearly $2 billion. It certainly would be in America’s best interests to move medical production back home or to trusted allies over time, but the sudden shift advocated by many in Washington right now would catch our country unprepared, cost thousands of jobs, and lead to a devastating shortage of medicines.
For starters, our Science, Technology, Engineering, and Math (STEM) workforce pipeline is nowhere close to that of China, which graduates nearly double the number of STEM professionals as the United States. In order to bring new, advanced manufacturing jobs back home, billions of dollars in additional workforce investment are required, according to The Manufacturing Institute. And this is before we can even consider new facilities or shifting supply lines.
Second, America is not as competitive as we need to be in order to shift supply chains for long term success without causing market turmoil.In fact, we are tied for 26th among OECD countries in the generosity of tax credits for research and development. As it stands, countless other countries, including China and Japan, are better positioned to attract new talent and domestic manufacturing. Right now, companies actually have more incentive to leave the U.S. than to stay.
This doesn’t have to be the case, though. It is true that long term efforts to boost domestic manufacturing and move toward more reliable global partnershipsare likely in our country’s best interests. But before we get there, it is critical that decisionmakers take a step back and understand the full scope of the current playing field and what is required to chart a responsible and successful path forward, saving jobs, keeping prices from skyrocketing, and ensuring the United States maintains its position as the innovator of the world. To do this, time, workforce development, and targeted incentives are the name of the game.
