Source: Blog – Alliance for American Manufacturing
A worker inspects the form of the shaped steel billets following the “press” stage in the manufacturing process of 155 mm caliber shells at an army munition plant in Scranton, Pennsylvania in April 2024 | Getty Images
The third in an occasional series of AAM policy recommendations as a new era in Washington begins.
The deterioration of the U.S. industrial base presents grave risks for our economic welfare and national security, which share a close relationship. The latest wakeup call comes from a leaked U.S. Navy briefing slide, which revealed that China’s shipbuilding capacity is 232 times greater than that of the United States. The implications of this staggering estimate were hardened by a war game exercise run by the U.S. House Select Committee on China, which forecast heavy American surface ship and submarine losses and an inability to recover from them in the event of a conflict centered on Taiwan.
The unfortunate, yet entirely predictable, reality we now face is that decades of offshoring are responsible for alarming economic and national security risks that experts have long warned about.
In “Preparing for 21st Century Risks,” a 2012 AAM report, former Department of Homeland Security Secretary and Pennsylvania Gov. Tom Ridge warned the United States was unprepared to recover from disaster — whether it was terrorism, cyber disruption, or pandemic – because of its dependence for offshore critical manufacturing capabilities. The Ridge report warned that foreign entities like China may make a deliberate choice to not supply needed products, materials, or technologies during a time of crisis.
A year later, an AAM report entitled “ReMaking American Security” authored by Brigadier Gen. John Adams, U.S. Army (Ret.), found the U.S. military over-reliant on imported raw materials, parts, and products used for national defense. Adams examined the risks and vulnerabilities associated with 14 defense-critical natural resources, inputs, and components — including semiconductors and rare-earth minerals — and presented recommendations to help mitigate these risks posed by pervasive outsourcing.
These warnings may have been heard, but much more must be done to prepare our nation for future crises. Such security concerns were no longer an academic exercise at the onset of the Covid-19 pandemic, the fallout from which demonstrated what widespread supply chain disruptions due to lost U.S. production and a reliance on foreign sources looked like. These industrial base vulnerabilities are further magnified as our nation has sought to support our allies with weapons and material, creating potential challenges should the United States become engaged in a potential conflict with China over Taiwan.
To be sure, policymakers have taken notable steps to bolster production capabilities in critical sectors. The Inflation Reduction Act, for example, directs funding and creates incentives for the domestic production of critical minerals required for a number of military applications; and, the CHIPS and Science Act makes a significant down payment to reshore semiconductor production, an intricate manufacturing process whose end product is essential to U.S. economic welfare and national security.
But as the recent examination of U.S. shipbuilding capacity demonstrates, we’re still deeply dependent on unreliable and uncooperative foreign sources throughout our industrial base. A combination of public investment in critical sectors, coupled with an industrial policy framework that allows these sectors to serve U.S. economic and national security demands, must be a top priority. Failing to address these clear vulnerabilities will leave our nation at risk of being unprepared for the next crisis.
Policy Recommendations
1. Initiate new Section 232 investigations to safeguard U.S. economic welfare and national security when traditional trade remedy tools are not sufficient to address global overcapacity in key sectors; also, strengthen existing Section 232 actions on steel and aluminum – which have been narrowed by product exclusions and country exemptions – to ensure that these critical sectors are prepared to respond to military and critical infrastructure demands.
2. Advance the pending Section 301 investigation into China’s predatory support of its maritime, logistics, and shipbuilding sectors, which the USTR said warrants “urgent action,” and impose strong responsive actions to level the playing field and revitalize U.S. shipyards; also, maintain and strengthen the existing Section 301 action on China which imposes exclusionary tariffs on autos and other critical products where Beijing is seeking to disrupt our supply chains.
3. Impose restrictions on federal assistance for infrastructure projects being used to make purchases from China’s state-owned and –supported companies while strengthening application of and closing loopholes in existing laws, such as the Transportation Infrastructure and Vehicle Security Act and Airport Infrastructure Vehicle Security Act.
4. Strengthen enforcement of congressionally directed restrictions on foreign entities of concern and countries of concern to ensure that taxpayer-backed tax incentives do not inadvertently benefit China and other foreign adversaries.
5. Expand existing “connected vehicles” restrictions to cover additional sectors of concern – including buses, commercial vehicles, drones, and maritime applications – thus ensuring that hardware and software embedded in critical infrastructure from China and any other foreign adversary does not put our nation or the public at risk.
6. Strictly enforce domestic content sourcing laws, such as the Buy American Act, to ensure that federal procurement and defense acquisitions backed by American tax dollars support U.S. companies and America’s workers.
7. Ensure that proposed Defense Procurement Agreements are fully evaluated by the Departments of Defense and Commerce, in consultation with U.S. industry and labor, to understand potential adverse impacts on the U.S. industrial base and workers when domestic content preferences are waived as a means of facilitating trade of defense items.
Read other entries in our Blueprint 2025 series here.
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