Republicans and Democrats have been busy crafting language for the bipartisan infrastructure package. As President Joe Biden continues to tout the bipartisan proposal, the administration has just imposed a sweeping suspension order as part of the government’s continuing efforts to ban imports of products made using forced labor. This action will temporarily affect the import of essential goods required for US infrastructure and could become the largest import ban in US history.
The import ban covers all silica and derivatives of silica-based products manufactured by the Chinese entity Hoshine Silicon Industry and its subsidiaries. The range of products containing silica is extensive and includes solar panels and semiconductor chips, the building blocks of renewable energy systems and high-tech products, which are integrated into television, computer equipment , mobile phone, aerospace, communication and defense, etc. And because Hoshine and its subsidiaries dominate the global supply of silica and products made from silica, this far-reaching action affects all segments of the economy and the military that use electronic devices. It is therefore surprising that so few have taken the time to fully understand the broad scope of this import ban.
At a time when the United States takes unprecedented steps, through landmark legislation, to invest in national infrastructure and high-tech products, the import of essential goods needed to do so may be temporarily suspended . Consider the fact that Hoshine accounts for about 75% to 80% of China’s silica production from mines. In addition, China as a whole accounts for around 68% of the world’s silica production. Together, these facts mean that Hoshine silica accounts for 50-55% of the total volume of silica produced in the world.
At a minimum, in terms of US imports, the order’s ban essentially disqualifies 50-55% of the world’s silica production base from entering the United States, whether as a raw material, semi-finished product. -finished or incorporated into a finished product. But the practical impact is much, much greater. Given the very complex and layered nature of electronics
In the meantime, global trade flows may be temporarily disrupted until manufacturers and suppliers around the world determine how to manage their supply chains appropriately or find other sources of supply. For the most part, the former will be almost impossible. The latter is realistic, but it will take time. If we are patient, we can reap the benefits. The WRO is pushing the market to address long-standing supply chain vulnerabilities, and while there is no doubt that the process of relocating and relocating supply chains for critical raw materials is very painful, the result will strengthen the national security of the United States. This should always be our collective goal.
The first step in solving this supply chain puzzle is to recognize that there are vast reserves of silica in the United States and in our allied countries, such as Brazil, Norway and Malaysia, to meet our collective demand. Although production from these mines has been low due to their inability to compete on price with Chinese forced labor, the US government has changed the math overwhelmingly.
Over the coming months, America’s silica mines will require significant investments in equipment, machinery and labor, and they will need the flexibility of regulatory permits to realize their full potential. The US government can help speed this up with a sort of “Supply Chain Operation Warp Speed”. The Department of Defense has the ability to deploy Defense Production Act Title III funds to inject much-needed capital into these mines, and the US International Development Finance Corporation can use its funds to assist mines in partner countries.
More specifically, executive branch agencies are well equipped with effective legal authority to strengthen our supply chains, and Congress must play a proactive role in the appropriation process. The government must act responsibly and in a bipartisan fashion to relocate now and protect critical US supply chains. If this nation is truly committed to making our economy work and showing the world that America can “build back better” without resorting to forced labor, as Biden promised, time is running out.
Hon. Nazak Nikakhtar served as US Assistant Secretary for Industry and Analysis while performing the non-exclusive functions and duties of Undersecretary for Industry and Security at the Department of Commerce. Nikakhtar is now a partner at Wiley, a leading Washington, DC law firm. Mark Duffy is executive vice president and president of international practice at Signal Group.