Local Content Requirements
Create Demand for Domestic Manufacturing
Establish a 50% local content requirement (LCR) for goods that are critical to national security or the industrial base as defined by the Departments of Commerce and Defense, mandating that domestic labor and domestically sourced intermediate goods account for at least half the value in those critical goods.
For decades, policymakers and Wall Street promoted the idea that goods should be made wherever is cheapest, regardless of the effect on our national industrial base. Low-cost imports, made artificially cheap by foreign subsidies, reduced demand for domestic products, while offshoring of industrial capacity in pursuit of lower costs diminished America’s ability to compete or innovate. Investing in new domestic capacity makes little sense with supply chains (and thus demand) entrenched overseas and America now lacking both the scale and the knowhow to compete. But just as policymakers created the problem by ignoring the importance of where things are made, they can help to fix it by creating guaranteed demand for things made in America.
Congress should establish a 50% local content requirement (LCR) for goods designated as critical for national security or the U.S. industrial base by the Departments of Commerce and Defense, with “domestic content” defined as the sum value of domestic labor and domestically sourced intermediate goods. LCRs create guaranteed demand for domestic production, harnessing market forces to serve that demand efficiently. The requirement will support a more robust U.S. industrial base and promote investment and innovation, replacing the vicious cycle of industrial decline with a virtuous one of expansion.