Securing the US Defense Supply Chain

 The Issue

Many resources required by the United States’ defense industry are sourced from China, which some argue creates a level of dependency and vulnerability for the US military on a rival market. The consequences of the coronavirus pandemic has modeled the problems that occur when the global supply chain falters and domestic production is not enough to compensate. Since early 2020, the US technology industry has increasingly found itself without the necessary tools to continue producing mobile phones, computerized vehicles, and other information and communication technologies (ICTs) that rely on semiconductors due to emergency travel restrictions between the US and China. As this shortage threatens the procurement strategy of the US military, the attention of the US government has snapped to evaluating and strengthening the nation’s supply chains.

Current Approach

The US had begun attempting to strengthen its supply chain through China under the Trump administration, which sought to codify suspicion of Chinese industry and encourage investment within the United States through prohibitive orders on Chinese ICTs that might have negative implications for the US defense industry. The Biden administration has continued this interest in increasing supply chain resiliency and has sought to evaluate dependencies across the government to develop a comprehensive response that will allow the US to diversify trade away from China where possible, while recognizing that a full decoupling is untenable. The United States lacks the scale of rare earth element resources, mining, and processing that China possesses.

However, it is certainly not impossible for the US to increase its exploitation of resources located within its borders and produce more of the basic components it needs domestically. The Department of Defense (DOD) has funded multiple projects to build US-based processing facilities, for example in early 2021, where a $30.4 million contract was awarded to an Australian mining company to operate in Texas. Concerns about foreign ICTs also persist in the aftermath of the 2020 supply chain hack of US defense agencies through SolarWinds. The US Department of Commerce served several subpoenas on Chinese ICTs in March of 2021 in an effort to investigate the transaction activity of foreign businesses. Overall, the dependence of critical technology sectors in the US economy on Chinese industries is recognized as a high-priority national security issue for the United States.

Thinking Forward

Addressing the dependency of US defense industries on China is not an impossible task, but it is one that requires measured, long-term expectations. The degree to which the US economy can be feasibly extricated from China has limitations in a globalized economy when China possesses a disproportionate wealth of rare earth minerals and the expertise to process them. While the United States is not devoid of resources or skill, the timeline to build the infrastructure necessary to extract and process them also requires the expansion of a specialized workforce to organize and perform the work. In the short-term, granting contracts to industries in allied nations like Australia and increasing funding incentives to domestic industries will still struggle because of these limitations. Cooperation with China will remain crucial to certain areas of defense procurement even as the US attempts to diversify its sources over the next several years.