The House Financial Services Committee’s hearing this week on the reauthorization of the Defense Production Act is timely and important. The DPA is an essential tool for national security that was little known prior to COVID-19. Its use during the pandemic helped the U.S. government mobilize its industrial base to allocate and distribute goods as well as make investments to build industrial capacity in critical areas such as ventilators and personal protective equipment during a time of national crisis.
That recent experience, coupled with the daunting national security challenges facing us today, makes it a great time to strengthen the DPA for the future. Here’s how we can do it:
The most essential action is to keep the Defense Production Act strictly focused on national security needs. The DPA became widely known during the COVID-19 pandemic but grew out of the success of World War II’s mobilization efforts. Signed into law in 1950, the DPA has three active titles today used in various manners to shortcut bureaucratic government processes to meet exigent circumstances.
Prior to the pandemic, for example, DPA titles were used to prioritize the production of aluminum for use in the development of lifesaving mine-resistant, ambush-protected vehicles during the Iraq War; to create beryllium factories for defense uses; and to counter Chinese foreign investment that impacts national security.
Today, it is currently used to great effect in reshoring and building industrial base capacity in areas such as rare earth processing, castings, forgings and advanced batteries. The increased use of DPA is welcome, but its popularity has also led to its invocation to support domestic production of solar panels and heat pumps, which has caused political controversy.
This was a focus at an initial House hearing in March. That hearing struck exactly the right tone: It is essential to keep DPA focused exclusively on defense and national security issues, in particular threats from our pacing competitor, China. As I wrote with my co-authors in 2022, using DPA outside of direct national security purposes threatens the viability of this unique tool for rebuilding a robust, resilient and globally competitive American industrial base.
With that national security purpose firmly in mind, there are several ways to strengthen the existing DPA provisions. At the national level under Title I, the DPA is governed by a mishmash of old and overlapping executive orders spanning numerous administrations that need to be refreshed and simplified. While detailed plans are not solutions by themselves, the administration should conduct a thorough review of relevant executive orders and regulations to better orient DPA policies and practices to address future national security challenges.
DPA Title III has been a tremendous tool to address aggressive Chinese industrial policy in areas such as rare earth processing, batteries, magnets and microelectronics. The non-delegable requirement for the president’s signature on each DPA determination, however, has significantly slowed the process by which DPA projects are developed and executed. Allowing the delegation of that determination in the upcoming 2025 reauthorization of the DPA, perhaps to the secretary level of those agencies with Title III authority, would significantly streamline the development of Title III projects.
Another significant improvement would be the use of purchase commitments under Title III. Purchase commitments would allow the Department of Defense to create a guaranteed demand signal for an industrial capability over a mutually agreed upon period of time, thereby reducing risks for industry to make investments in areas such as critical materials.
Purchase-commitment projects, however, are not an option currently because Congress has appropriated DPA funds over the past three years using standard procurement funds, which expire in two years, contrary to traditional DPA appropriations, which do not expire. That needs to change to start using this important authority.
While the Committee on Foreign Investment in the United States continues to do critical national security work evaluating foreign investment under the authority of Title VII, there are important aspects of that title that have been dramatically underused. Title VII, for example, permits the government to establish voluntary agreements or plans of action with industry “to help provide for the national defense.” The administration, for example, could consider establishing voluntary agreements to prepare standby industrial capacity for potential surge use during conflict.
Title VII also permits the president to establish the National Defense Executive Reserve, a volunteer group of industrial executives like WWII’s War Production Board to advise on or support mobilization efforts. Creating an active NDER unit to support industrial preparations for potential major conflicts sounds like an incredibly appropriate action to consider right now.
The DPA is a powerful tool that enables our nation to prepare for or respond to national security emergencies. Let’s build on the strengths of today’s DPA and make it the foundation for America’s arsenal of the future.
Author: Jerry McGinn
Source: DefenseNews
