U.S. policymakers are intensely concerned about global defense supply chains and for good reason. Renewed great-power competition has elevated the importance of national defense and the industrial base that supports it. This includes the United States’ sourcing of strategic materials, which are required to build the weapons systems and defense capabilities utilized by the U.S. military. Just last year the COVID-19 pandemic demonstrated the fragility of our access to these materials.
The Reality of American Manufacturing and Pandemic Resilience
Contrary to conventional wisdom, there is little evidence of systemic weaknesses in the United States’ “industrial capabilities” (i.e., the ability to produce the goods that the country needs in times of war or other national emergency) the metric that, along with access to similar capabilities abroad, the Department of Defense considers critical for national security.
In fact, the U.S. manufacturing sector remains among the most productive in the world and is a global leader (see Table 1).
The sector’s health is perhaps most evident in its relative ability to attract investment. In 2018, for example, foreign direct investment (FDI) inflows into the U.S. manufacturing sector alone (almost $167 billion) were larger than