All hands are on deck as the Trump administration evaluates measures that would drive manufacturing back to the United States from China amid the coronavirus outbreak.
The effort stretches from the White House and National Security Council to the Federal Emergency Management Agency, the Defense Department to Health and Human Services. “Everyone’s working,” a senior administration official told the Washington Examiner.
This official said that while the 2017 Tax Cuts and Jobs Act included an appealing corporate tax rate, a reduced regulatory burden, and lowered the cost of repatriating profits at the same time the administration has “aggressively” enforced trade laws, more is needed to encourage manufacturers to relocate from China.
Options range from tax abatement and regulatory relief, to a potential $25 billion “reshoring fund.”
The next step is likely to take the form of tax or direct incentives for shifting production to the U.S., this person said. “You don’t want to pick winners and losers, and you don’t want to pick specific companies, but we need, and are, looking at the the critical industries for the health and safety of the United States.”
This could include money for states to use to work with companies, including for research and development or potential infrastructure grants, or tax incentives for capital investment.
“It’s not an easy process, but there’s definitely a sense that the next step has to be taken whereby our companies are not competing against countries and that we, as a country, start competing against other countries to make [the U.S.] a very attractive place for U.S. production to take place,” this official said.
“It’s a huge, huge discussion point,” the official added. “Huge. It’s happening throughout the whole enterprise.”
The CARES Act also set aside money for manufacturing extension partnerships, which disburse millions of dollars to centers around the country to help them assess how to bring manufacturing back.
The Reshoring Initiative’s Harry Moser said that deferring to the free market won’t solve the problem because China has manipulated its currency, subsidized its companies, and stolen intellectual property. The U.S. is also specifically disadvantaged with the costs associated with being the reserve currency, he said.
“The average American, they saw what happened when the main factory in the town closed, and everybody was unemployed and on opioids,” Moser said. “They’ve seen that, they experienced it. And so they can’t shelter in that theory the university professor in a protected position can enjoy.”
President Trump has long pledged to boost U.S. manufacturing, telling Fox Business host Maria Bartiroma this month that watching the car industry move to Mexico was “probably” the foremost reason he ran in 2016.
One former White House official said the coronavirus pandemic has accelerated these changes, which are likely to persist even if Trump loses reelection.
“[Trump] looks at the Chinese as bad actors and thinks erosion of the American industrial base is a bad thing. The rise of China and the erosion of the base are connected. The president is as committed to this as he can be,” this person said. “The next president is is going to be, too. Republican, Democrat, whatever. Somewhere in the last six months, Americans decided that the Chinese are the problem children.”
National security adviser Robert O’Brien told reporters last week that the administration is focused not on “retribution” against China, but on returning essential manufacturing to the U.S.
“I think what the president’s doing every single day with his advisers and Secretary Pompeo and Secretary Mnuchin, Secretary Esper, with all the folks here at the White House, is he’s trying to figure out how to protect the American people, try to make sure our supply chains for critical items are here, so they’re no longer connected to China,“ O’Brien said.
The administration has taken steps it says will bolster advanced drug manufacturing and secure supplies of active pharmaceutical ingredients and precursor chemicals for medicines that are typically manufactured overseas, often in India or China.
Still, “It would take massive incentives from federal, state and local officials to make this proposition even palatable to a profit hungry industry. We are going to need the incentives, but there’s only so much money to go around,” said Steven Lynn, the former director of the Food and Drug Administration’s Office of Manufacturing and Product Quality and a supply chain expert.
Industry sources called for the administration to issue a report on the security of the medical product supply chain and the risks associated with foreign dependence, as the CARES Act instructs the National Academies of Sciences, Engineering, and Medicine to do.
