Adapting Trade Policy for Supply Chain Resilience: Responding to Today’s Global Economic Challenges

Foreword

Four years ago, the Covid-19 pandemic and attendant disruptions to global trade revealed the terrifying and destructive effects of fragility in our supply chains. These networks of workers and businesses both at home and abroad supplied the U.S. market with goods ranging from semiconductors and medical supplies to many other consumer and industrial goods. Before the pandemic, “just in time” sourcing from “global value chains” was the governing principle, and concern over how or where goods were made and whether their manufacture harbored latent risks and vulnerabilities was not widespread. But faced with sudden shortages, production delays, and price spikes – taking the hardest toll on those with the least – “just in time” has given way to “just in case.”

The architecture of many supply chains, however, had been taking shape for decades. Their fragility had in part been enabled by a trade and investment policy that prioritized short-term cost-efficiency, profit maximization, and shareholder returns. This approach helped shape investors’ and producers’ decision-making processes that, in many cases, fostered geographical concentration, operational complexity, and bottlenecks, which in turn heightened the risk of volatility, harms to competition, and inflationary dynamics – all of which have been felt in the United States and around the world.

The Biden-Harris Administration has forged new approaches to advancing supply chain resilience across the government. Here at the Office of the United States Trade Representative (USTR), this work has been carried out through trade negotiations, enforcement actions, and other policy initiatives. As we have understood existing trade incentives, rules, and biases to form a fundamental part of what led the world to the brink with brittle supply chain networks, we are confident that new and different trade policies and approaches can and must be a part of the solution.

As we navigate new territory, we have sought to use a “building blocks” approach as we craft, in real time, a version of globalization that is organized according to a new set of principles – ones that are more responsive to the needs of people and planet and to the painful lessons we have learned these past few years. Over time, it became clear that in support of this approach, we needed to provide our stakeholders and partners with a dedicated process to share their input and learnings derived from navigating recent unprecedented supply chain disruptions. As it turns out, no one can do trade, much less change the way trade is done, alone.

Accordingly, early last year, my team and I initiated a stakeholder engagement process to formulate and articulate a more holistic approach to promoting supply chain resilience using trade tools and policies. In March 2024, USTR requested public comment through a Federal Register notice. In outlining a new trade policy vision, the notice explained that resilient supply chains provide a range of sourcing options; adapt, rebound, and recover with agility following shocks; uphold labor rights and environmental protections; strengthen the U.S. manufacturing base and workforce; and mitigate risks of price spikes and volatility that contribute to inflationary dynamics. USTR staff heard testimony at four public hearings from 84 witnesses and received nearly 300 written submissions from a wide range of stakeholders, including labor unions and labor rights non-governmental organizations (NGOs), think tanks, environmental NGOs, companies small, medium, and large, and trade associations, as well as foreign governments. 

The enclosed policy paper series “Adapting Trade Policy for Supply Chain Resilience: Responding to Today’s Global Economic Challenges” marks the culmination of this public engagement effort by distilling our progress in strengthening supply chains and outlining new approaches and strategies covering the following topics:

• “Reshaping the Global Trade Paradigm” (Policy Paper No. 1) explores four distinct but complementary dimensions of resilience—sustainability, security, diversity, and transparency—by synthesizing stakeholder views and relevant literature, reviews USTR actions that have advanced supply chain resilience, and builds a conceptual foundation for exploring new tools and approaches.
• “Sustaining Resilient Textile and Apparel Supply Chains” (Policy Paper No. 2) provides an overview of the domestic textile and apparel industries and related U.S. trade agreement provisions, examines the challenges confronting the sector, identifies areas for further discussion and analysis, and presents trade policy approaches to support more resilient textile and apparel supply chains.
• “Harnessing Rules of Origin for Resilience” (Policy Paper No. 3) examines both preferential and non-preferential rules of origin, discusses emerging stakeholder concerns about their vulnerabilities, and outlines new policy approaches and areas for further analysis.
• “Countering Non-Market Policies and Practices to Strengthen Supply Chain Resilience” (Policy Paper No. 4) describes the challenges that non-market policies and practices (NMPPs) present to healthy markets and competition, explains how certain actors use NMPPs to undermine supply chain resilience, and outlines approaches to addressing NMPPs and their effects on supply chains.
• “Improving Data and Analytical Tools to Promote Supply Chain Resilience” (Policy Paper No. 5) highlights recent studies and analyses of supply chain sustainability, security, diversity, and transparency; examines data and analytical challenges in measuring and assessing supply chain resilience; reviews U.S. government supply chain-related data gathering efforts; and outlines new approaches and implications for harnessing existing and new data and analytics resources to address limitations.
• “Strengthening Supply Chain Resilience through Sectoral Trade Agreements” (Policy Paper No. 6) discusses how a new model of formal trade agreements targeting specific sectors or industries, establishing enforceable disciplines, and encompassing like-minded partners across the supply chain could provide a broad and meaningful framework for achieving the principles and objectives of supply chain resilience.

Of course, much more remains to be done to realize the goal of improving supply chain resilience. Each policy paper outlines new policy tools and approaches that merit further study and collaboration between USTR and interagency partners, stakeholders, Congress, and like-minded trading partners. Beyond the issues taken up in the policy papers, there are opportunities to explore in greater depth how resilience objectives in these next years should inform new trade policy approaches to topics ranging from services and agriculture, to technology and regulation of the digital economy. And finally, new ideas must translate into impact; the hard work of meeting new supply chain challenges with concrete, innovative policy actions and tools will continue.

To advance supply chain resilience, we must and we will traverse new ground in trade and investment policy. The policy papers that follow remind us of where we have traveled, acknowledge the challenges that shape our journey today, and light our path ahead to better serving all Americans for generations to come.

Ambassador Katherine Tai,

United States Trade Representative,

January 2025

To read the series of policy papers as published by the Office of the United States Trade Representative, click here.