U.S. Needs a National Industrial Strategy

“I believe we’re going to see a migration from global supply chains to regional ones. The world needs smaller, robust supply chains that are environmentally clean and sustainable. But that’s not going to happen by itself,” John McElroy writes.

John McElroy, Columnist

April 20, 2021

4 Min Read
gettyimages-lithium mine
Industrial policy could reward companies with environmentally responsible mining operations.Getty Images

Globalization is a great thing until it isn’t. And right now, we’re at the “isn’t” part of the story.

Over the past two decades the world built up an incredibly efficient network of supply chains. But recent events show they’re also remarkably fragile. All it takes is an earthquake, a pandemic, a winter storm or a ship stuck in the Suez Canal to shut down factories all over the world.

I’ve written recently about the microprocessor shortage that is crippling auto production. But it goes beyond microchips.

There is a long list of at-risk materials and products that are critical to the health of any economy. In the U.S., the situation is so serious that the Biden Admin. launched a 100-day review of critical supply chains. Europe is doing a lot of soul searching, too. Chances are the next stoppage is right around the corner. Action needs to be taken.

But we don’t need action that veers from one crisis to the next. We need a comprehensive industrial strategy that anticipates and pre-empts potential problems. Some of them are quite obvious. For the auto industry, the choke points are access to cobalt, nickel, lithium and rare earth materials for electric car batteries and motors.

The U.S. (and Europe) is highly dependent on Asia for these materials – mainly China, which locked up contracts with global mining sources and built the infrastructure needed to process these materials.

China was smart. It planned ahead, anticipated where the market was going and made sure it had the policies in place to achieve a dominant position. Its strategy is paying off handsomely.

However, that doesn’t have to be the end of the story. North America, for example, has plenty of these materials, but they are not mined as extensively as they could be for environmental reasons.

Mining can be a nasty, dirty business. And remediation, or restoration, is extremely expensive. That’s why the world largely relies on mining these materials in underdeveloped countries with lax environmental standards. It’s much, much cheaper that way.

The same goes for processing these materials. It’s a dirty business and doing it in an environmentally sustainable way drives up costs. So, it gets done in countries that are willing to look the other way as their landscape gets poisoned.

Mining and the processing of industrial materials are inherently dirty. The good news is that this can be greatly mitigated, but it takes a lot of investment to do that. A national policy that rewards companies for doing it the right way would allow them to offset the environmental costs so they could compete with the countries that are willing to poison their own air, land and water.

Now for what we don’t need: The U.S. does not need an industrial strategy that picks winners and losers. We don’t need the government owning and operating mines or processing facilities. Instead, we need a policy that rewards the private sector for meeting the strategic needs of the country and the economy.

McElroy.jpg

McElroy_6.jpg

This is not a call to cut off China. The goal does not have to be 100% self-sufficiency. Markets work best when the competition is intense. And maintaining competition from China will keep the U.S. on its toes. But right now, the U.S. (and Europe) is overly dependent on China for critical materials and that’s not a healthy situation.

Global supply chains are efficient, but they generate a massive carbon footprint. Mining materials in one continent, then shipping them to another continent for processing, then shipping those materials to another region to be made into products, then exporting those products around the world consumes vast amounts of energy. It doesn’t have to be that way.

I believe we’re going to see a migration from global supply chains to regional ones. The world needs smaller, robust supply chains that are environmentally clean and sustainable. But that’s not going to happen by itself.

What the U.S. needs is a comprehensive national industrial policy that provides the economy with the resources it needs to grow and prosper. And the sooner we put a policy like that in place, the better off we’ll be.

John McElroy (pictured above, left) is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit.

Read more about:

2021

About the Author(s)

John McElroy

Columnist

John McElroy is the president of Blue Sky Productions, which produces “Autoline Daily” and “Autoline After Hours” on www.Autoline.tv and the Autoline Network on YouTube. The podcast “The Industry” is available on most podcast platforms.

Subscribe to a WardsAuto newsletter today!
Get the latest automotive news delivered daily or weekly. With 5 newsletters to choose from, each curated by our Editors, you can decide what matters to you most.

You May Also Like