One month and four days after taking office, President Joe Biden issued an Executive Order on the supply chains of the US economy. The main motivation for this presidential measure was—and continues to be—the need for secure, diverse, and strong supply chains to overcome the weaknesses and vulnerabilities of existing chains as a result of possible terrorist attacks, pandemics, biological threats, extreme natural phenomena, as well as economic and geopolitical competition, among other factors, that affect manufacturing capacity and the availability of goods, products, and services for the U.S. economy and population.
Through this order, President Biden instructed various high-level government agencies to produce reports identifying problems and risks, while making recommendations on how to strengthen supply chains in multiple areas, such as manufacturing and trade, energy, defense, transportation, pharmaceuticals and health in general, agriculture, among other sectors. These are just a few examples of what is contained in the ambitious work agenda of this executive order, which essentially puts the entire federal government to work with a view to producing a major change in the foundations of U.S. economic development with a long-term perspective.
The Executive Order directs various federal government agencies to submit proposals on how to establish or reestablish sustainable domestic supply chains, which implies a policy of attracting to U.S. territory (reshoring) production and supply capacities that are located outside the United States, in many cases in distant countries that are not necessarily friends or partners. The Biden administration seeks to reduce dependence on external sources for the goods and products that keep the U.S. economy running.
President Biden’s initiative echoes President Donald Trump’s economic nationalism, although Biden’s agenda is much more sophisticated and better conceived, as it is expected to rely on substantial federal government resources to implement internal changes, especially in critical infrastructure, which has fallen so far behind in the United States when compared to some Asian and European countries. Unlike Trump, Biden does not seem to be playing the game of “breaking arms” with American companies to get them to return to the United States, but rather is proposing a more complex strategy in which the federal government will play a leading role in driving this agenda of structural reforms.
Although this strategy seeks to prioritize the United States in order to restore and develop new domestic productive capacities, it does not go as far as the economic chauvinism that seemed to characterize the Trump administration. The Executive Order recognizes the importance of cooperating with allies and partners to identify alternative and complementary supply chains to those that exist or may be developed in the United States.
Although Biden does not expressly state this, the action plan he has outlined leaves room for some of these supply chains to be developed in partner countries close to the United States (nearshoring). The member countries of DR-CAFTA (the Dominican Republic and the countries of Central America), Panama, Colombia, and Mexico are called upon to enter into this nearshoring process, as they already have free trade agreements and are strongly integrated with the U.S. economy.
The Dominican Republic offers very attractive conditions for playing an active role in this process. It is a politically stable country with a small but diverse economy and a surprising ability to recover from external shocks and crisis situations. It is also a partner and friend of the United States. Of course, Dominican manufacturing capacity, especially in free trade zones, is geared toward light products, but some of the products manufactured in our country can already be considered important in the supply chain to the U.S. economy. The challenge is to take that productive capacity to another level, but that requires a clear strategy for productive transformation that takes into account this shift that is beginning to take place in the United States.
President Biden’s administration has a great opportunity to strengthen the economies of its neighboring countries with which it has free trade agreements and cooperative relationships in security and many other areas. To achieve this, while thinking about its own reshoring process to internally strengthen the supply chains its economy needs, it must also promote the development of our countries’ capabilities through cooperation programs in workforce training, the development of more sophisticated productive capacities, and the expansion of new production lines that complement sectors of the U.S. economy, among other factors. In this way, a new cycle of strengthening relations between neighboring countries and partners could be achieved in a context of enormous challenges to respond to the demands for well-being, prosperity, and security of our people.
Published in Diario Libre: https://www.diariolibre.com/opinion/otras-firmas/reshoring-vs-nearshoring-estados-unidos-y-sus-socios-comerciales-NG28596209