It used to be a simple matter to outsource production to other countries, have them manufacture clothes, electronics, computer chips, and medicines, and ship the items back to the United States. America provided value through design capabilities and reliance upon domestically-produced components. But many businesses utilized inexpensive labor from abroad to assemble products, and global distributors then would deliver materials “just-in-time” for American firms.
Now we are seeing the limits of this model. It is a time of tremendous disruptions in global supply chains with many problems ranging from shifts in consumer demand and off-shoring reliability to transportation jams, anti-competitive practices, and geopolitical complications. As noted in a 2022 Council of Economic Advisers report, supply chains currently “are efficient but brittle – vulnerable to breaking down in the face of a pandemic, a war or a natural disaster. Because of outsourcing, off-shoring and insufficient investment in resilience, many supply chains have become complex and fragile.”
In this paper, I outline six ways to improve global supply chains:
Boosting domestic production through on-shoring and near-shoring
Easing transportation jams
Prioritizing public health
Managing labor shortages
Fighting anti-competitive practices
Mitigating geopolitical tensions
Making progress in these areas would go a long way towards easing current global supply chain disruptions and putting global trade back on a firmer footing.
To read the full report from the Brookings Institution, please click here.