Politico - EU, U.S. need to reduce supply-chain dependency on single countries, Barry Lynn says
Executive director Barry Lynn was featured throughout an article in Politico that highlights supply-chain discrepancies throughout the globe and the relations with off-shore reliance.
BRUSSELS - Global supply chains desperately need more competition and a 25 percent cap on how much can be sourced from any individual country could help achieve that, says Barry Lynn, the founder of the Open Markets Institute think tank.
Lynn was one of the most influential people in alerting the U.S. antitrust community to the dangers of Big Tech, with his former protégé Lina Khan now leading the powerful Federal Trade Commission in Washington.
In an interview with POLITICO, Lynn advocates a radical overhaul of the world’s supply chains, whose fragility has been starkly highlighted by the war in Ukraine and the coronavirus outbreak. The one-two punch of the pandemic and the Ukraine conflict has highlighted, among other weaknesses, the EU’s addiction to Russian energy and the dependence of European car makers on Asian microchips.
The European Commission in March proposed a plan to diversify energy supplies, making Europe independent from Russian fossil fuels “well before 2030.” Both the EU and the U.S. have in recent months introduced plans that will allow billions in government support for the semiconductor industry to bolster the production of microchips, among other initiatives.The European Commission in March proposed a plan to diversify energy supplies, making Europe independent from Russian fossil fuels “well before 2030.” Both the EU and the U.S. have in recent months introduced plans that will allow billions in government support for the semiconductor industry to bolster the production of microchips, among other initiatives.
While not always visible for consumers at the level of the brand, the manufacturers of components have often come to operate in a heavily consolidated market.
“Suddenly, we wake up and we find that because no one has been paying any attention … all of it is coming out of China,” Lynn said.
That leaves our economies open to catastrophic failures, such as an earthquake in Taiwan, where over 60 percent of the world’s outsourced microchips are produced. “We would lose our ability to build cars, electronics [including] iPhones and medical devices for the period we don’t have access,” Lynn said.
Lynn puts forward a more structural, economy-wide approach by proposing that trading blocs such as the EU or the U.S., for any essential good or service, should not rely on a single country for more than a quarter of their supply.
His proposals to increase competition, which he says need to be “developed further,” would require large amounts of subsidies for certain companies, but Lynn said that would not necessarily distort competition. State aid for the industry can be one of the “most potent ways” to increase competition, Lynn said, “but the question then becomes how do you regulate the system after the capacity has been built?”
Lynn insisted that his proposal to cap the maximum exposure to any one country at 25 percent was “not traditional protectionism.”
“The other 75 percent doesn’t mean that it comes from the United States — 25 percent could come from Japan, another 25 percent could come from Germany, another 25 percent could come from Brazil or India,” he explained.
Companies receiving state support should be subject to limitations on dividend payments and possibly also compensation for management, in Lynn’s view.
Breton and Vestager
Lynn’s thinking is hard to fit into the traditional European stereotypes of free traders versus protectionists. Although he is a fervent promotor of a strong competition policy, he sees himself more aligned with French President Emmanuel Macron and EU industry chief Thierry Breton when it comes to how the West should shape the industry of the future.
Lynn was “very impressed” with a speech Breton gave at a recent competition event in Brussels. “Breton is someone who can play a key role in this,” he said.
The American writer and former journalist is disappointed with EU competition chief Margrethe Vestager, however. The core group of experts under Vestager, he said, “is fighting very hard to keep doing what they’ve been doing” and they “think Lina Khan is a dangerous person [with] dangerously radical ideas,” he said.
Lynn sees Vestager as part of a competition community that has been excessively focused on consumer welfare and efficiencies for companies since the 1980s.
“Competition policy in the United States [before the 1980s] used to aim to have at least four or five major industrial corporations [in every sector], manufacturing say aluminum or chemicals,” he said. “We essentially eliminated those rules.”
This led to what Lynn calls a first wave of consolidation, mostly domestic, that left, in certain instances, two or only one manufacturer per sector by the 1990s. A second wave, consolidation in the international system, came after the World Trade Organization was founded in 1995, causing a “growing willingness to rely on offshore sources of supply for 100 percent of some good,” according to Lynn.
Coercion by hostile regimes is another risk factor. “We are seeing this very up close right now with Russia,” he said, but also highlighted China’s control over electrical components and chemicals needed for drug and food production.
Most people know Lynn from when he quit the liberal Washington-based think tank New America in 2017 with the entire team of the Open Markets Program. The exit followed alleged pressure from Google, one of the organization’s sponsors, which Lynn had criticized in a blog post.
His team included Lina Khan, who rose to fame with a damning publication about Amazon and moved on to be appointed chair of the U.S. FTC by President Joe Biden in June 2021. Other members of the team were Matt Stoller and Zephyr Teachout, both influential critics of Big Tech and advocates of stronger competition enforcement.
After he quit New America, Lynn was praised by then-lawyer Jonathan Kanter, who is now in charge of antitrust at the U.S. Department of Justice.
Lynn has “been fearless and persistent in pushing these issues,” Kanter told POLITICO at the time. “It’s hard to think of somebody more central to the discussion than Barry and Open Markets.”