Made in America to Sell in America

I agree with some of what’s in Josh Hawley’s New York Times op-ed, disagree with other things. Here’s its kernel:

At its core, our crisis of scarcity is a crisis of production, most acutely felt in the goods that we need the most. Whether it be personal protective equipment, pharmaceutical drugs or semiconductors, the coronavirus pandemic has exposed a hard truth: The United States — the strongest country in the world — cannot produce an adequate supply of the critical goods it needs.

The failure of the nation’s productive capacity to keep up with its needs was not inevitable. It was a choice. Over the last 30 years, experts and politicians in Washington from both parties helped build a global economic system that prioritized the free flow of capital over the wages of American workers, and the free flow of goods over the resiliency of our nation’s supply chains. We liberalized and expanded trade relations with China under the delusion that it could be influenced into becoming a peace-loving democracy. We ceded more and more of our national sovereignty to multinational organizations like the World Trade Organization, and supported China’s membership to that body.

I would quibble a bit about the wording, for example, “does not” rather than “cannot” but you will undoubtedly note the similarity between that and things I’ve been saying around here for, literally, decades.

Here’s his proposed remedy:

I’m proposing new legislation to take a big first step: the Make in America to Sell in America Act.

Under this plan, officials at the Department of Commerce and the Department of Defense will identify goods and inputs they determine to be critical for our national security and essential for the protection of our industrial base. These goods would then become subject to a new local content requirement: if companies want access to the American market for these critical and essential goods, then over 50 percent of the value of those goods they sell in America must be made in America. Companies will have three years to comply, and can receive targeted, temporary waivers if they need more time to reshore production. In effect, the legislation applies the domestic sourcing principles of the Buy American Act — a law that governs federal government procurement — to the entire commercial market.

When it comes to our most critical goods, this “majority-made” standard is just common sense and harder to game than more complicated rules. And the requirements of this standard will be enforced with a compliance mechanism that closely mirrors one of the nation’s oldest trade remedy regimes: anti-dumping. Under my proposal, domestic producers can petition the U.S. International Trade Commission if they suspect that corporations or importers have violated the local content requirement, and the secretary of commerce can take enforcement actions such as civil penalties following an investigation to ensure the new standards are met.

What I agree with is

• We need to produce more of what we consume
• Certain strategic goods like memories, processors, ICs, some pharmaceuticals, some foods and food additives, etc. must be produced here full stop.

and what I disagree with is

• His criticism of the Biden Administration. I think the present ill-considered emphasis on frugality is just turning necessity into a virtue. I think the Administration has been misled by experts starting with the Federal Reserve governors.
• His failure to recognize just how difficult and expensive what he’s proposing will be. It will take substantial subsidies.
• No matter how subsidized we need to recognize that actual production by the federal government may be required for some goods.
• I don’t think he recognizes the influence of the BANANA faction in the Democratic Party. They will be uncontrovertibly opposed to this.
• I think his approach isn’t granular enough.

While I agree that we need to produce more of what we consume, I also think that some things should be “nearshored”, i.e. produced in Canada, Caribbean, Central or South American countries. That would also take a bit of the pressure off the ports of Los Angeles and Long Beach which appear to be one component of the bottleneck.