Leaders from the U.S., European Union and 14 other nations on Sunday agreed at the G20 summit in Rome to work together, along with industry, unions and international organizations, to mitigate ongoing supply chain disruptions and make the entire system more resilient in the future.
President Joe Biden also took more steps Sunday to ease bottlenecks snarling the global supply chain.
“I want to make sure we have access to all the products we need, from shoes to furniture to electronics to automobiles,” Biden said during a press conference. “Ending the pandemic is the ultimate key to unlocking the disruptions we’re all contending with. But we have to take action now, together with our partners in the private sector, to reduce the backlogs that we’re facing. And then, we have to prevent this from happening again in the future.
“Now that we have seen how vulnerable these lines of global commerce can be, we cannot go back to business as usual. This pandemic won’t be the last global health crisis we face. We also need to increase our resilience in the face of climate change, natural disasters and even planned attacks,” he added.
The intensified government attention to supply shortages, which could mean many orders arriving late for the holiday shopping season, is a sign to many that the free market is failing to resolve the situation.
“Many of our supply chains are almost entirely owned and operated by the private sector. But government can play a key role identifying supply chain risks and bringing the different pieces and actors together to address these vulnerabilities,” the president said.
The new efforts follow recent administration actions to push Southern California ports to extend gate hours for truck transfers of containers, the launching of an early warning system for potential disruptions in semiconductor manufacturing linked to public health emergencies in key trading partners and last week’s Department of Energy announcement establishing Li-Bridge — a new public-private alliance aimed at accelerating development of a strong domestic supply chain for lithium-based batteries.
The COVID pandemic exposed long-standing weaknesses in the goods movement system. World leaders committed to address immediate supply chain disruptions as well as building long-term redundancy and nimbleness that will make supply networks — from sourcing raw materials all the way to shipping, logistics, warehousing and distribution — better able to withstand unforeseen events.
Soaring demand for goods has overwhelmed the manufacturing and freight transportation sectors, resulting in massive port backlogs and extensive product outages for companies with goods stuck in transit. Limited labor availability due to COVID restrictions, extreme weather events, accidents and other dislocations have compounded delays, which is having cascading effects on the trucking, warehousing and railroad sectors.
The leaders said they would focus on making supply chains more transparent, diversified, open, predictable, secure and sustainable.
Improving information sharing among countries, and working with companies to understand their own vulnerabilities, will help mitigate global supply chain shocks, the group said in a statement of principles. The goal is to promote awareness of risks and potential shortages, identify bottlenecks and determine whether alternative sources of critical inputs are needed.
Countries expressed their intent to work toward ensuring they have multiple reliable sources of raw materials, intermediate goods and finished goods and the means to transport them. Reducing sourcing and manufacturing concentration will prevent nations from being overly dependent on a single partner, open trade and promote prosperity in more parts of the world, they said.
“Our supply chain should be: one, diversified, so that we’re not dependent on any one single source that might cause a failure; secure against natural and man-made threats, including cyber and criminal attacks, like ransomware; transparent so that both government and the private sector can better anticipate and respond to shortages that may be coming down the pike; and sustainable, to ensure our supply chains are free from forced and child labor, supporting the dignity and the voice of workers and are in line with our climate goals,” Biden said.
“But, like so many challenges today, it isn’t a problem any one of our nations can solve through unilateral actions. Coordination is the key,” he added.
Workforce reductions in the logistics sector have contributed to slower delivery times. Biden was asked why workers have not returned to their jobs after the pandemic as fast as expected.
“Because they’re able to negotiate for higher wages, and they move from one job to another. That’s one of the reasons why,” Biden responded. “A lot of people don’t want to continue to do the job they did before, making 7, 8, 9 bucks an hour. An awful lot of the truck drivers are not unionized truck drivers. They’re working like hell and not getting paid a whole lot. And so what you’re seeing here is a combination of the desire of people to be able to change professions, to be able to do more and take care of their families, and at the same time, dealing with the issue that, in fact, we are short of workers.”
On the domestic front, Biden issued an executive order delegating the authority to the Department of Defense to make releases of minerals and materials from the National Defense Stockpile, streamlining the decision-making process for responding to shortfalls within the defense industrial base. The move follows through on a recommendation from a White House review of supply chain vulnerabilities for critical products. Strategic materials are only allowed to be released for production associated with national defense, but the order also reminded the private sector that one component of supply chain resilience is maintaining adequate buffers against potential shortages.
The White House also took steps to facilitate trade by cutting red tape associated with the transfer of documents needed for goods to clear customs.
Biden last week announced millions in funding for new U.S.-Association of Southeast Asian Nations initiatives, including funding to link the ASEAN and U.S. single-window systems. The U.S. for years has been building out the capabilities of its International Trade Data System, which functions as a single access point for industry to electronically submit all data required by various government agencies involved in international trade. Companies submit data through U.S. Customs’ Automated Commercial Environment, and the ITDS system routes documents to relevant agencies such as the Food and Drug Administration that are required to approve the entry or collect statistical data. Synchronizing the exchange of data between customs authorities in the U.S. and Asia is designed to speed up import and export reviews, allowing shipments to clear ports faster.
Meanwhile, the State Department will allot additional funding to provide technical assistance to Mexico and Central American countries to alleviate supply chain disruptions and bottlenecks.
The White House also announced it will convene a summit next year that will involve private companies, labor, academic institutions and foreign governments to establish next steps in building more adaptive supply chains.
Semiconductor producers, suppliers and consumers have until early next week to submit responses to a Commerce Department request for voluntary sharing of information about inventories, demand and delivery dynamics. The goal of the RFI is to understand and quantify where bottlenecks may exist.