During the past five years, Americans have heard a lot from two presidential administrations and Congress about the need to onshore manufacturing. In accordance with the slogans “Buy American” and “Made in America,” the noble concept seeks to bring production and jobs back to the U.S. and to reduce our economy’s dependence on foreign suppliers and supply chains.
Clearly two years of the COVID-19 pandemic and its impact on global trade has reaffirmed what Presidents Donald Trump and Joe Biden have argued: America no longer is able to produce many products and items that companies and consumers desperately want and need. But the idea that America must completely onshore the manufacturing of items such as microchips, vaccines, televisions, and critical technologies misses the point. Having and maintaining robust foreign suppliers through a “Buy Allied” approach is essential for the American economy to remain strong and will help reduce dependencies on Chinese sources.
Take, for example, the aerospace and defense industry. This industry is already one of the strongest domestic manufacturing sectors because of existing Buy America laws and the need to keep sensitive technologies on U.S. soil. However, to only have domestic sources in American defense items both flies in the face of how military goods are manufactured and is self-defeating when U.S. forces need to operate and fight with allies and partners.
There are at least four essential reasons why making the U.S. aerospace and defense industry exclusively “Made in America” is neither feasible nor desirable:
- Both the Trump and Biden administrations recognized that the American defense-industrial base has become too dependent on single-source suppliers. The Trump administration’s supply chain vulnerability report, released nearly four years ago in accordance with executive order 13806, starkly noted that there are only one or two suppliers in the world who can provide critical materials or components necessary to manufacture military systems. The Biden administration’s executive order 14017 on defense supply chains recognized similar vulnerabilities, particularly in lower ends of the supply chain (e.g., rare earth elements and microelectronics). Both efforts recognized the importance of engaging with allies and partners to build U.S. industrial resilience.
- Defense Department acquisition officials are always seeking the best technology and solution for their systems; and sometimes that technology does not originate in the United States. In two recent competitions, for example, the Navy selected the Italian shipbuilder Fincantieri Marine Group to build its next class of frigates, and the Air Force selected Saab as the prime for the T-X trainer. In both cases, these companies partnered with U.S. companies on their bids, and they are now building these systems in the United States.
- Programs are designed from the outset with foreign partners in mind to help lower costs of research and development as well as and production. They’re also designed to ensure interoperability between the U.S. and its allies. The best known example is the F-35. From its design, the F-35 was meant to be a multinational fighter not just because many nations would fly it but because many nations would be involved from its earliest days in investing in its capabilities and design. By doing so, the U.S. taxpayer did not have to shoulder as much of the financial burden, and the allies would bring the best of their own technologies to the table to build this common platform.
- A Buy America-only approach is counterproductive to U.S. economic and security cooperation priorities. Most countries around the world do not have an advanced defense-industrial sector that can produce at scale for their nation’s military. Therefore, most nations buy American, French, British, Israeli or other nations’ defense items. It is challenging, however, for U.S. defense officials to argue for the security cooperation benefits of purchasing U.S. defense systems when the administration has published a final rule increasing Buy America requirements on U.S. systems from 55% to 75% by 2029.
As has been noted by numerous think tanks and congressional panels, America’s defense-industrial base has weakened over the past decade or so. Congressional budgeting and appropriations issues — such as sequestration and continuing resolutions, unhelpful DoD acquisition policies, outsourcing to countries where labor is cheap, and intellectual property theft by China and other countries, among other issues — have introduced such elements of risk and unpredictability to many small and medium-sized companies, such that they have decided to exit the market and the greater DoD ecosystem.
This is bad for American competitiveness and innovation.
The current administration is right in its policies to encourage onshoring of key technologies and production capabilities. The hundreds of billions of dollars in infrastructure and pandemic-relief funs need to be smartly used to invest in those areas that America needs in order to keep the economy strong and modern.
However, adopting policies that discourage or penalize American companies from procuring key products and resources as well as partnering with allies and friendly countries not only hurts the American economy but will weaken America’s ability to provide for a strong national defense.
Daniel Fata is a nonresident senior adviser at the Center for Strategic and International Studies. He previously served as the U.S. deputy assistant secretary of defense for Europe and NATO policy during President George W. Bush’s administration. Jerry McGinn is executive director of the Center for Government Contracting at George Mason University’s School of Business. He is a former senior acquisition official for the U.S. Defense Department.
