With the inauguration of Joe Biden as the 46th president of the United States behind us, it is now time to turn to his administration’s agenda. At the forefront of concern for President Biden is mitigating the ongoing COVID-19 pandemic while restoring and reviving the economy. This week, our team at Global Advantage Consulting Group focused on Biden’s long-term supply chain plans and their impact on Canadian businesses.
The Biden Administration’s supply chain reforms are aimed to protect domestic supply chains and ensure access to critical pandemic supplies, such as vaccines and personal protective equipment.
President Biden’s Administration announced a plan last week outlining measures to build a “sustainable public health supply chain” in order to marshal government resources towards securing supplies, treatments and vaccines to fight the COVID-19 pandemic.
He has initiated a 100-day review of national supply chain risks and asked Congress to enact a mandatory quadrennial review. The Administration intends to close identified gaps and institute an ongoing government-wide process to monitor supply chain vulnerabilities.
Part of the plan is to address supply chain gaps and analyze the role of foreign entities in the supply of critical materials. In order to combat shortages of vital goods, domestic production must increase, anti-competitive practices should be stopped, stockpiles sized strategically and plans implemented to surge capacity in times of crisis, in addition to partnering with allies.
The three pillars of Biden’s plan are:
- Rebuild domestic manufacturing capacity of supply chains for critical products
- Ensure the U.S. has the supplies it needs to address future crises and national security
- Protect supply chains by working with allies and opening foreign markets up for American exports
Challenges for Canadian firms
Canadian companies provide a vast array of services and goods to the U.S. In Q1 2020, Canada-U.S. goods trade was valued at $106 B in exports and $74 B in imports.
However, there is concern that Biden’s strategy to bolster American manufacturing capacity necessary for critical supply chains will block Canadian firms from bidding on projects.
Canadian manufacturing companies are deeply integrated with that of America. Goods trade with the U.S. is more dependent on motor vehicle and parts, as well as energy products. The continental supply chain relies on Canada’s supply of bits and parts to factories. Canadian firms across sectors are the most likely to suffer from a Buy America policy.
The executive order is expected to set broad requirements, with specific regulations to be implemented by separate agencies. The new rules are not taking place immediately, so there is time for Ottawa to lobby on behalf of Canada’s interests.
Prime Minister Trudeau and Biden have discussed the Buy American policy in a joint phone call, and there is encouragement that Canadian firms may be protected due to the integration of the supply chains. However, the recent blindside of the Keystone XL pipeline cancellation showed that Biden will make decisions without consulting Canada.
A centralized director who will enforce the Buy America rules will institute a central review of waivers that will allow agencies to buy foreign-made content. Some experts think this centralized position could help Canadian companies by having a singular place to go to ask for exemptions.
Some experts believe that despite the order, the Biden Administration wants to maintain a strong working relationship with Canada. Canadian firms will likely continue to assist U.S. manufacturing by providing products and materials they cannot source domestically.
Vulnerable to supply chain shocks
Canada is a trading nation, and the international border and travel restrictions have shown that cross-border choke points affect both exporters and importers.
Approximately one-third of Canada’s manufacturing firms export goods or services. Twenty-three of the top-25 most vulnerable industries to international supply chains disruptions were all in manufacturing in 2020.
To mitigate these disruptions, exporting firms can deliver goods and services digitally via information and communication technologies or conduct transactions remotely. COVID-19 has shown to be a disruptor to traditional business operations and companies must adapt to survive.
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