The U.S. needs to move away from a “China-centric” supply chain and focus more on sourcing exports from countries with social and economic policies more aligned with those of America, according to Arkansas Gov. Asa Hutchinson, who kicked off FreightWaves’ two-day The Future of the Supply Chain conference in his state Monday.
“We have strained relations right now. They do not respect the rule of law as we do in the United States,” the Republican governor said, adding that shipment costs and delays are also factors that should encourage a shift away from China.
Furthermore, uncertainties over President Joe Biden’s trade policy with China should factor into companies’ decisions in dealing with the country, Hutchinson stated.
“When you see those uncertainties of our trust relationship with China, with the difficulty of the rule of law that they have in China, with the delays and with all those other uncertainties — including trade policy — it is smart and it is logical that we look for options from a China-centric trade supply chain,” Hutchinson said.
Hutchinson’s comments come as the U.S. and other countries are grappling with geopolitical uncertainties, most recently Russia’s conflict with Ukraine. The conflict has led some countries, particularly those in Europe, to find alternate sources of energy and agricultural products.
Hutchinson made three other suggestions to the auditorium full of supply chain professionals during his keynote speech Monday in Rogers, Arkansas, on how attendees should view the U.S. supply chain.
In tandem with moving away from a reliance on China, the U.S. should realign its supply chain relationships and transition its overseas development of goods to allied countries. Allied countries can be broadly defined as those that understand “the importance of ordered liberty” in which liberty “is governed by the rule of law, and that there is recourse for business whenever you have challenges or disputes,” Hutchinson said.
This is key should there be any disagreements over trade policies or intellectual property theft, he said.
For instance, Mexico is one such allied country, but the Mexican government needs to be more aggressive in combating the influence of drug cartels in order for that country to be “a better partner in terms of the rule of law,” Hutchinson said.
Hutchinson’s third suggestion is to encourage the development of smart transportation technologies. This could be accomplished by embracing automation at U.S. ports, particularly the busy ports of Los Angeles and Long Beach, as well as through company partnerships and individual company innovations, such as one between Walmart and Gatik to utilize autonomous vehicles from warehouse to retail centers.
Developing these technologies could also encourage the onshoring of key industries, particularly those that are more sensitive to supply chain disruptions, such as the manufacturing of personal protective equipment and semiconductors, according to Hutchinson.
Onshoring, Hutchinson’s fourth suggestion, could be facilitated through appropriate federal and state initiatives and laws to encourage a return to American-made goods. For instance, the innovation and competition bill currently pending in Congress could be one way to enhance research in specific technologies to develop domestic industries. This bill has the support of Hutchinson and the bipartisan National Governors Association.
Another is for state regulations to make it easier for companies to go through the permitting process. Hutchinson pointed to U.S. Steel’s efforts to construct a $3 billion steel plant in Arkansas. That plant could be permitted, built and operational before U.S. Steel could even get a permit in Pennsylvania, he said, noting this is significant because the plant in Arkansas will rob Pennsylvania’s status of being the top steel producer in the U.S.
“That’s a regulatory hurdle that hurts our country in growing and prospering and moving our economy forward,” Hutchinson said.
As the country moves forward, believing in the country’s capabilities will help propel domestic manufacturing — and associated supply chain resiliency — forward.
“What we need today is optimism. … I believe in America. I believe in our strength, I believe in our freedom. I believe in our ordered liberty based upon the rule of law, and that will always set apart the United States of America as a stronger and a freer nation,” Hutchinson said. “But you have to set the example and the tone for our future. So I’m glad that you’re convened here. I’m glad that you’re going to come up with new ideas.”