Naval and air defence, Image: Green Oak, Shuttlestock
A “Pincer” Movement to Secure Supply Chains?
Dear Members
Good Morning!
Once again, a Sunday morning here in Cleveland Heights, Ohio. The weather’s actually quite decent at the moment: a bit of a change. Although we still have some snow on the ground. Luckily, I was able to avoid much of it, finding myself, as I did, in both Austria and Germany a lot of last month.
As some may remember, February is always quite busy for me on the non-“office” front. Toward the end of the month every year we hold our Zero Project conference at the United Nations in Vienna, Austria. This year was no exception, with the conference turning out to be our largest ever.
We had over 1,000 people from more than 80 countries around the world who came into town to discuss, over a period of three days, independent living and political participation for persons with disabilities. I chaired various sessions, spoke in others, interviewed people in various “Fireside Chats” and had a thoroughly busy time. This I followed with a three-day visit, my first time, to our offices in Frankfurt, Germany. Where I had to present, once again. This time to clients.
During the course of my travels, whilst I was musing on things “defense” and “strategic” in the metals and minerals world (and how I had ended my last letter to you), I also started to think about just what we might be doing about protection on the intellectual property/innovation front in the space here in the US.
Chatting with our editor here at The Crucible, she drew my attention to two specific news items, related to these concerns, in which she thought I might be interested.
I certainly was. So, let me tell you, too, about them.
The first concerns defense. (You may remember that, as I drew my letter to a close last month, I said I would keep you posted on anything I learned about what the US Department of Defense (“DoD”) is up, especially when it comes to investment abroad.) OK, it may not be about investment abroad, however, on 27 February, President Jo Biden issued a Memorandum on Presidential Waiver of Statutory Requirements Pursuant to Section 303 of the Defense Production Act of 1950, as amended, on Department of Defense Supply Chains Resilience, seeing this action as “… necessary to avert shortfalls in critical Department of Defense supply chains that would severely impair national defense capability.”
As the US Department of Defense describes it, the waiver enables it “ … to more aggressively build the resiliency of America’s defense industrial base and secure its supply chains.” It goes on to say that: “Specifically included in the Waiver are defense organic industrial base supply chains critical to the DoD as well as critical supply chains for electronics, kinetic capabilities, castings and forgings, minerals and materials, and power and energy storage.
This authority also affords the ability to invest [I am not sure whether this mean ex-US too] in strategic areas that enable the industrial base such as workforce development.” And, in particular, this “ … removes the statutory spending limitation for aggregate action against a single shortfall exceeding $50 million. This in turn allows the Department to make more substantial, longer-term investments.”
What this amendment does is it unties the hands of the DoD in investing directly in mineral as well as downstream raw material supply for what it considers critical application. If any evidence was needed that critical minerals are now viewed as a matter of national security, this is unarguably it.
In addition, according to Anthony Di Stasio, Director of the Manufacturing Capability Expansion and Investment Prioritization (MCEIP) office, the flexibility now afforded the DoD is seen as not only protecting US military and commercial interests, but also “ … maintaining our superiority over competitor nations.”
Whilst maintaining that superiority is, on the one hand, very important. It can, on the other hand, really only be maintained if it is also protected.
And this is where the other arm, as it were, of the “pincer” necessarily comes in. And why I found a press release put out by the US Department of Commerce (“Commerce”) on 17 February particularly interesting.
The release detailed the announcement by Commerce and the US Department of Justice (“Justice”) that, in a joint initiative, they were launching the “Disruptive Technology Strike Force.” The serious and, encouragingly, very practical intent of this move is described in the release thus: “Under the leadership of the Justice Department’s National Security Division and the Commerce Department’s Bureau of Industry and Security (BIS), the strike force will bring together experts throughout government – including the FBI, Homeland Security Investigations (HSI) and 14 U.S. Attorneys’ Offices in 12 metropolitan regions across the country – to target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.”
Whereas, during the Trump administration, they were described as “enemies”, they are now “autocrats” and “nation-state adversaries.” But their intent remains the same. Not least, they seek, amongst other things, “ … tactical advantage through the acquisition, use, and abuse of America’s most innovative technology.” In the words of Assistant Attorney General Matthew G. Olsen: “The Disruptive Technology Strike Force takes aim at those who imperil our national security and the rule of law by illegally transferring sensitive technologies to foreign adversaries.”
So, on the one hand, maintenance and, on the other, protection of our technical superiority. A pincer movement to protect supply chains? I believe so. But maybe the pincer will turn out to have more than two arms and morph into something totally different. We shall just have to wait to see.
With that, I should like to bid you farewell from Cleveland Heights for another month.
And I remain, as always
Yours
Tom Butcher
12 March, 2023
©2023 Tom Butcher
Zero Project: https://www.zeroproject.org
The White House: Memorandum on Presidential Waiver of Statutory Requirements Pursuant to Section 303 of the Defense Production Act of 1950, as amended, on Department of Defense Supply Chains Resilience, 27 February, 2023, https://www.whitehouse.gov/briefing-room/presidential-actions/2023/02/27/memorandum-on-presidential-waiver-of-statutory-requirements-pursuant-to-section-303-of-the-defense-production-act-of-1950-as-amended-on-department-of-defense-supply-chains-resilience/
Ibid.
US Department of Defense: President Biden Signs Presidential Waiver of Statutory Requirements for Supply Chain Resilience, 28 February, 2023, https://www.defense.gov/News/Releases/Release/Article/3312486/president-biden-signs-presidential-waiver-of-statutory-requirements-for-supply/
Ibid.
Ibid.
Ibid.
US Department of Commerce: Justice and Commerce Departments Announce Creation of Disruptive Technology Strike Force, 17 February, 2023, https://www.commerce.gov/news/press-releases/2023/02/justice-and-commerce-departments-announce-creation-disruptive
Ibid. The strike force will operate in 12 metropolitan regions across the United States, with oversight and support from the local U.S. Attorneys’ Offices in Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York City (Southern and Eastern Districts of New York), San Jose, California, Phoenix, Portland, Oregon, and the Washington, D.C. region (District of Columbia and the Eastern District of Virginia).
Ibid.
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Tom Butcher is Director of ESG at Van Eck Associates Corporation (“VanEck”). The views and opinions expressed herein are the personal views of Tom Butcher are not presented by or associated with VanEck or its affiliated entities. Please note that VanEck may offer investments products that invest in the asset class(es) or securities mentioned herein.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein.
