Supply chain shortages in the United States and the consequences of globalization are on the rampage

It has been a dizzying summer for the nation. Wildfires, floods and power outages have struck as Americans try to escape the impact of the COVID-19 pandemic. To complicate matters, there are shortages of everything from lumber and steel to consumer goods and automobiles. These supply chain disruptions are the unfortunate result of America’s over-reliance on a complex global import network. To correct this and start rebuilding the country’s manufacturing base, Congress and President BidenJoe BidenHow ‘Buy American’, Other Pro-American Policies Can Help Defenders Adopt Ambitious Climate Policies Overnight Defense & National Security – Presented by Raytheon Technologies – Biden looks back at Taiwan Photos of the Week: Manchin protester, Paris Hilton and a mirror room PLUS must correct America’s flawed business profile. And the key step to achieving this will be to repair the overvalued US dollar.

For months, headlines have focused on markets that continue to experience severe supply chain disruptions. For example, a global shortage of integrated circuit chips has already forced Toyota to cut production by 40%. Meanwhile, GM and Ford are stockpiling unfinished vehicles in airport and racetrack parking lots while waiting for missing parts. Initially, economists thought these problems would go away quickly. But experts are now warning that consumers may well have to accept such delays as the “new normal.”

This shouldn’t be surprising, however. Over-reliance on imports has left the United States dependent on excessively long and vulnerable supply chains. And US import penetration and manufacturing trade deficit continue to climb as a result. In fact, the share of imports in US manufacturing output has nearly doubled since 1997, and the US manufactured goods trade deficit is expected to hit a record high in 2021, exceeding $ 1,000 billion.

Heavy reliance on imports poses a growing threat to the economic and foreign security of the United States. Examples abound. During the early stages of the pandemic, China restricted exports of essential personal protective equipment. Likewise, nearly three-quarters of the 40 most popular brand-name drugs are imported. And many of the nearly 1,000 overseas pharmaceutical factories that supply American consumers have never been registered or inspected by the United States Food and Drug Administration. This endangers the safety and security of medical care in the United States. Likewise, a 2018 Pentagon study concluded that the U.S. military is too dependent on a range of imports, including integrated circuits used in satellites, cruise missiles, drones, and cellphones.

There are many reasons for this excessive dependence on imports. More than three decades of free trade agreements, often drafted at the behest (and with direct input) of U.S. multinationals, have encouraged companies to relocate production to low-wage locations in Mexico, China, and more recently in Vietnam. This was exacerbated by the strong dollar policies favored by Democratic and Republican treasury secretaries – including Robert Rubin, Larry Summers and Henry Paulson.

All of these officials came from (and returned to) Wall Street. This is important because Wall Street and the multinationals like a strong dollar, because it makes imports cheaper. But it also puts domestic workers in competition with low-wage foreign labor. As a result, the wages of manufacturing workers in the United States suffered. Meanwhile, the stock markets and Wall Street banks have made huge profits due to globalization and growing reliance on imports, even as Main Street America has suffered the loss of more than five million manufacturing jobs. and 91,000 factories since 1997.

Rebuilding national supply chains will be critical to the success of the Biden administration’s investments to “build back better” in physical and human infrastructure. However, many key domestic industries are now hanging by a thread.

Last year, the Commerce Department launched a national security investigation into potential shortages of key components of electrical transformers made with specialized grain-oriented electrical steel. There is only one US producer of this specialized steel type left, AK Steel, a subsidiary of Cleveland-Cliffs – and factories in Cleveland, Ohio and Pennsylvania are currently threatened by imports. Securing the supply of these essential materials will be key to rebuilding America’s infrastructure and ensuring that these investments create good jobs at home, not abroad.

Congress and President Biden are currently considering hundreds of billions of dollars in investments in manufacturing, research, workforce training and related programs. But these plans can only work if Washington takes steps to improve the competitiveness of the US manufacturing sector – and to create demand for manufactured goods made in the United States. But realistically, even after the nation embarks on a potential manufacturing renaissance, there will still be a short-term reliance on the same import chains currently in short supply.

Given the gravity of the situation, the most realistic way to stimulate demand for products made in the United States is to make them more competitive. And this can only be significantly accomplished by realigning the US dollar and reducing its value by about 25% against the currencies of China, EU, Japan, Korea and other countries. industries that currently benefit from structural trade surpluses.

An overvalued dollar is the driving force that continues to drive up imports. Since July 2014, the dollar has risen nearly 21%, thanks to the huge amounts of private foreign capital that continually flood the US financial markets and enrich Wall Street and its banks. This rising dollar makes US exports increasingly expensive – and lowers the price of the import stamp.

Some in Congress are already realizing the seriousness of the problem. Biparty Senate legislation introduced last year would address the overvaluation of the dollar by taxing foreign purchases of US financial assets. But that corrective action could be done faster with executive action from the Biden administration.

Growing trade deficits are the Achilles heel of the US manufacturing sector. As the supply disruptions and price bubbles resulting from the COVID crisis will likely subside over the next two years, the global threat posed by over-reliance and growing import dependence will accelerate.

Until Washington confronts the heavily overvalued US dollar, the nation will still be at the mercy of extreme import dependency. The realignment of the dollar is the most effective tool available to rebalance trade, rebuild manufacturing in the United States, and eliminate supply chain shortages posed by America’s disproportionate globalization.

Robert E. Scott is Senior Economist at the Economic Policy Institute (EPI). Follow him on Twitter @RobScott_epi.

Source link

Estelle D. Eden

Leave a Reply

Your email address will not be published. Required fields are marked *