Obama: Global supply chain security part of national security

Wednesday - 1/25/2012, 10:44am EST

DAVOS, Switzerland (AP) - President Barack Obama has adopted a new strategy declaring for the first time that the United States has a national security interest to protect the nation's economic goods against terrorists, criminals and natural disasters in all corners of the globe.

The new U.S. policy unveiled Wednesday by Homeland Security Secretary Janet Napolitano in Switzerland is called the "National Strategy for Global Supply Chain Security," according to a White House document provided to The Associated Press.

It says potential economic threats to goods dependent on supplies from beyond U.S. borders are now a matter of national security and that the government must "resolve threats early." And that's not just cargo shipments - all "cyber and energy networks" also are affected.

At the World Economic Forum in Davos, she called Obama's policy "a look across all of U.S. government" preparing for the worst. "When the unknown occurs, you have no time," she said.

Businesses have often sought to cut costs by farming out many parts of their operations, leaving them potentially more at risk to disruptions outside the confines of their traditional areas of management. But with the economy increasingly globalized, businesses are becoming more dependent on each other - and more exposed to these risks.

"The global supply chain provides the food, medicine, energy and products that support our way of life," the document says.

"Many different entities are responsible for or reliant upon the functioning of the global supply chain, including regulators, law enforcement, public-sector buyers, private-sector business, and other foreign and domestic partners," it says. "The system relies upon an interconnected web of transportation infrastructure and pathways, information technology, and cyber and energy networks."

Daniel J. Brutto, president of UPS International, said more such cooperation internationally would not only address supply chain threats but also speed up trade. "Many countries want a paper chain system, an archaic system, that slows down commerce," he said. "When there are disruptions, you are penalized very strongly and I don't think the financial institutions take that into account."

The Obama administration cites as reasons for the policy the 9/11 attacks and more recent plots involving air cargo shipments filled with explosives shipped via Europe and the Middle East to the United States, according to White House documents. Other events that have led to the change, the documents say, include Hurricane Katrina in 2005, the Interstate 35 bridge collapse in Minneapolis in 2007, Iceland's volcanic eruption in 2010 and Japan's earthquake and tsunami last year.

MIT professor Yosef Sheffi, an engineer who is an expert on risk in supply chains, said many companies can't even identify all of their suppliers. He said one company that makes iPhones, for example, has about 400,000 suppliers.

Obama, in a preface to the new policy, which is effective immediately, that "the global supply chain system that supports this trade is essential to the United States' economy and security and is a critical global asset."

The policy follows in the wake of a series of major natural disasters whose effects spill beyond one nation's borders.

"We have seen that disruptions to supply chains caused by natural disasters - earthquakes, tsunamis and volcanic eruptions - and from criminal and terrorist networks seeking to exploit the system or use it as a means of attack can adversely impact global economic growth and productivity," the president wrote.

"As a nation," he added, "we must address the challenges posed by these threats and strengthen our national and international policies accordingly."

The March tsunami in Japan, for example, was devastating for that nation's economy and temporarily disrupted the production of automobile makers and other manufacturers.

Car exports, too, declined after the recent flooding in Thailand, where many Japanese automakers have assembly lines. Iceland's volcanic eruption in 2010 paralyzed air traffic, affecting passengers and cargo around the world.

The White House "strategy" is not an executive order. But it instructs federal agencies to immediately focus on "those components of the worldwide network of transportation, postal and shipping pathways, assets, and infrastructures by which goods are moved until they reach an end consumer."

It also suggests that all U.S. trade partners should be pressed to agree to what Obama calls "information-sharing arrangements, streamlining government processes, and synchronizing standards and procedures."

The strategy has far-reaching implications. It not only would apply to all cargo goods entering the country by ship, airplane or truck - the U.S. already inspects all of what it considers to be the highest-risk cargo - but also could set the stage for U.S. action to strengthen the security provided in other countries.

Obama is requiring all federal agencies and departments to report back to him within a year on how their efforts are going and make "recommendations for future action developed during the outreach process" of talking with other countries.

(Copyright 2012 by The Associated Press. All Rights Reserved.)