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Amid shortage, Biden signs executive order to strengthen critical supply chains

WASHINGTON – Car manufacturers are forced to stop production due to lack of computer chips. Healthcare workers battling the coronavirus pandemic had to cope without masks while the United States waited for deliveries from China. And pharmaceutical executives worry that supplies of critical drugs could dry up if countries try to stockpile essential ingredients and block exports.

Deep disruptions in the global movement of critical goods during the pandemic prompted President Biden on Wednesday to take steps to reduce the country’s dependence on foreign materials. He issued an executive order requiring his administration to review critical supply chains in order to boost US production of semiconductors, pharmaceuticals and other advanced technologies.

In notes to the White House, the president described the move as an important step towards creating well-paid jobs and increasing the resilience of the economy to geopolitical threats, pandemics and climate change.

“This is about ensuring that the United States can meet any challenge we face in the new era,” he said.

But efforts with bipartisan support will do little to address the global shortage immediately, including in semiconductors, a key component in cars and electronic devices. The lack of these components forced several large American automobile plants to close or reduce production and send the administration to turn to allies such as Taiwan for emergency supplies.

Administrative officials said the order would not offer a quick correction, but would begin an effort to isolate the US economy from future shortages of critical import components.

Mr. Biden discussed the issue in the Oval Office on Wednesday afternoon with nearly a dozen Republican and Democratic members of Congress. Senator Chuck Schumer, a New York Democrat and majority leader, called for a bill to be drafted and passed this spring to address supply chain vulnerabilities.

“Currently, semiconductor manufacturing is a dangerously weak place in our economy and in our national security,” Mr Schumer said. “Our automotive industry is facing a significant shortage of chips. This is a technology created by the United States; we must lead the world in it. The same goes for building 5G, the next generation telecommunications network. There is a bipartisan interest in both issues. “

Republicans came to the White House with optimism that such efforts could soon move forward. Representative Michael McCall, a Republican from Texas, said he was pleased to see that the White House had made the issue a top priority and that the president was receptive. “His words were, ‘Look, I’m inside,'” he said.

Mr McCall said much of the talk revolved around legislation passed by Congress last year to boost the chip industry – but which still needs funding for research grants and a repayable investment tax credit – as and the current shortage of chips and possible job losses in the automotive industry.

“China is looking to invest $ 1 trillion in their digital economy,” Mr McCall said. “If we are to be competitive, we must encourage these companies to produce these advanced chips in the United States.”

Mr Biden called the meeting one of the best in his presidency so far. “It was like it used to be,” he said. “People were actually on the same page.”

The president ordered annual reviews of six sectors and a 100-day review of four product classes in which U.S. manufacturers rely on imports: semiconductors, high-capacity batteries, pharmaceuticals and their active ingredients, and critical minerals and strategic materials such as rare earths.

Further action to strengthen these supply chains will depend on the vulnerabilities identified, officials said.

“We will get out of business by responding to supply chain crises as they arise and start businesses to prevent future supply chain problems,” said Peter Harel, senior director of the White House for International Economics and Competitiveness. news.

The enforcement order is not aimed at imports from any particular country, but is seen as an early volley in the administration’s economic battle with China. Beijing’s dominance of global supply chains for raw materials and critical products such as medical masks has raised deep fears that its authoritarian government could cut the United States, causing even greater economic disruption.

At the start of the coronavirus pandemic, China diverted exports of surgical masks and protective equipment to its local governments and hospitals, leaving foreign buyers empty-handed. Along with India, China is also a major source of active ingredients involved in the production of vital medicines, including antibiotics and pain medications.

China also periodically takes measures to ban the export of rare earth materials, which are crucial for the production of electronics, fighter jets and weapons; it proposed new export restrictions this year.

China, which produces most of the world’s rare earth supplies, is using much of its own to build domestic supply chains, leading to declining exports in recent months, said Pini Althaus, the U.S. executive director for rare earths. which is developing a rare earth and lithium deposit in Texas.

Without these minerals, the United States cannot produce quantum computers, deploy a 5G network or make electric vehicles, he said.

“Panic is beginning to occur in a number of industries and a number of government agencies because we are currently in a very precarious position,” Mr Althaus said.

Mr Schumer said Wednesday that he has instructed Senate leaders and committee members to begin drafting a new legislative package “to surpass China and create new US jobs”. He said he intends to put the bill, which will be based on the bipartisan Infinite Borders Act he introduced last year, on the Senate floor for a vote this spring.

The legislation will encourage investment in US semiconductor manufacturing, which he calls a “dangerous weakness in our economy,” as well as 5G, artificial intelligence and biomedical research.

“I want this bill to meet America’s short-term and long-term plan to protect the semiconductor supply chain and keep us No. 1 in things like AI, 5G, quantum computing, biomedical research, storage,” Mr Schumer said. “We need to get a similar bill quickly at the president’s office.”

The semiconductor industry welcomes both the ambitious legislation of Congress and Mr. Biden’s executive order.

Bob Bruggeworth, chairman of the Semiconductor Industry Association and CEO of Qorvo, a semiconductor company, said his industry was ready to work with the Biden administration. he insisted the president and Congress to “invest ambitiously” in manufacturing and research.

“This will ensure that most of the chips our country needs are made on the shores of the United States, while promoting sustainable US leadership in technology at the heart of US economic power and job creation, national security and critical infrastructure, “said Mr Bruggeworth.

But semiconductor industry analysts say the administration is unlikely to be able to do much to address the chip shortage in the near future. Most chip factories operate at almost maximum capacity, and expanding production is likely to take at least three to six months, if not longer.

The Biden administration has tried to urge Taiwan and other major chipmakers to put US makers at the top of their lists. But General Motors and Ford were forced to close factories and cut production; both believe the chip shortage will reduce their operating profit by at least $ 1 billion this year. GM’s chief executive told a Wolfe Research conference on Wednesday that the company had begun to see the situation improve in recent weeks.

Charlie Chesbro, a senior economist at Cox Automotive, said Mr Biden’s executive order is likely to have little effect on the car industry in the near future, given that supply chains are usually set years in advance.

“The more severe inventory problems on the market today and the plant delays caused by the shortage of computer chips are expected to be with us for most of 2021,” he said.
“Enforcement order or not.”

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