December 2, 2020
Categorized: Digital Trade
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Earlier this month, IBM CEO Arvind Krishna sent a letter to President-Elect Biden committing our company to support the Administration in tackling the monumental challenges facing the United States. Arvind noted that throughout its history, IBM has supported the visions of presidents in times of crisis and profound change.
One of the most pressing challenges facing the incoming Administration will be accelerating economic growth in the face of the COVID-19 pandemic. As President-elect Biden and his team plan the transition, there is an immediate action they can take on Day One that will boost economic growth and drive job creation.
Specifically, the incoming Administration should provide immediate, targeted relief on certain tariffs imposed under Section 301 for inputs, parts and components that support advanced manufacturing in the United States. A limited, early removal of the most counter-productive of the China tariffs could provide relief for U.S. manufacturing, while leaving the new Administration space to negotiate further tariff changes based on Chinese market access commitments.
IBM exemplifies American competitiveness in advanced manufacturing. For example, Poughkeepsie, New York, has long served as the center for the manufacture of IBM System Z mainframes, a critical backbone of global ICT infrastructure. Banks, telecommunications, utilities, retail and governments all run their operations and Cloud infrastructure on IBM.
In 2019, IBM exported approximately $8 billion in goods and services from the United States to over 120 countries. These exports support a dynamic manufacturing, research and investment ecosystem across the United States. And each year, IBM spends more than $9 billion with American suppliers to support these operations.
But IBM’s ability to manufacture in America requires sourcing from a complex, inter-connected global supply chain, which includes China. The imposition of Section 301 tariffs has raised sourcing costs by tens of millions of dollars. These imports do not represent high-value technology products – rather, they are necessary inputs into U.S.-made systems and include such items as printed circuit board assemblies, mechanical parts, fans, power distribution units, power supplies, and cables – largely available only from Chinese sources.
Ensuring America remains a leader in advanced high-tech manufacturing should be the primary focus of U.S. trade and innovation policy. Tariffs on critical inputs for U.S. manufacturing are among the most counterproductive and harmful of the measures imposed to date, and should be early candidates for removal.
The incoming Biden-Harris Administration can give a direct boost to U.S. manufacturing through targeted tariff relief on these sorts of component parts and inputs. Such a step would provide immediate benefits to U.S. manufacturing while also redirecting U.S. policy toward more international, and coordinated, action to address Chinese market access issues.
The COVID-19 crisis has brought about an important discussion of global supply chain vulnerabilities across all industry sectors. Many companies, including IBM, are taking steps to diversify production and supply chains. But China remains an important source of ICT components.
IBM stands ready to work with the incoming Biden Administration to address long-term supply chain vulnerabilities. We urge the Administration to support advanced manufacturing in the U.S. by immediately lifting Section 301 tariffs on a targeted list of ICT components and inputs.
Alan Kohlscheen – IBM Director of Import Compliance and Supply Chain Security
Michael DiPaula-Coyle – IBM Director of International Trade Policy