How the New $571 Billion Infrastructure Plan Will Impact Global Supply Chains
In just the first few months, the US government has taken many initiatives to improve the US economy. Recently the new administration proposed a mega infrastructure, worth $571 billion in transport funds for the current federal levels.
In addition, an extra $50 billion would be spent to make this infrastructure adaptable to climate change. This $571 billion project is a part of Joe Biden’s $2.25 trillion economical plan.
The White House has sent these documents of the proposal to Capitol Hill, which includes all the breakdown of the spending.
The plan includes $115 billion for the existing roads and bridges to fix and modernize them before working on expanding the transportation network.
The budget calls to spend $40 billion on the construction of new bridges, $10 billion on the alternatives for transportation, and $5 billion for the block grants in community transportation.
The plan will also spend on the improvement and expansion of public transportation. For the repairing of existing transport $55 billion, for the expansion $25 billion and $5 to implement the of the “Disability Act” for the Americans.
An amount of $17 billion is set aside for ports and water transportation. The aviation will get a share of $25 billion, the Federal Aviation Administration’s plan will upgrade airports by spending $10 billion for the renovation of the airport terminals. National Airspace System will also get $5 billion to improve its facilities.
Railways will get $80 billion, the major portion of $39 billion will go towards the improvement and modernization of the Northeast corridor of Amtrak. Its national network will get $16 billion in grants, the intercity passenger railways will get $20 billion, and an extra $5 billion for safety purposes.
As said by the President, that these projects will help to fight climate change and increasing threats of global warming, the development of electric transportation will get a mouthful amount of billion dollars. A total of $160 billion would be spent, it includes a network of half a million electric car charging stations, zero-emission transit vehicles, electrification of school buses, and rebates to electric car owners.
Impact on global supply chains:
How does this much spending impact the global supply chains?
Before the COVID-19 pandemic, supply chains were working relatively smoothly and were meeting consumer expectations and needs for quick and proficient delivery.
The current challenge we face is overcoming the gap and disconnect created by COVID in order to mitigate market volatility and get back on track.
In the eastern part of the world, China is developing a huge set of the transportation networks to make clear ways for its supply chains. Last year China dominated the export of pharmaceuticals because of their superior infrastructure. The supply chain relies on modern technology, excellent communication, effective relationship, and smooth transport infrastructure.
This bill envelops something beyond logistics, extending to issues of manufacturing and end-to-end supply chains.
International trade is the backbone of the global supply chain, which is mostly carried out by shipment. Shipyard and then its transportation to the desired location is the primary area of focus.
This bill will cover this aspect of the global supply chain. With the construction of new transportation infrastructure organizations and companies exploit the new capacity by changing their supply chain and logistics to improve their services and lower costs.
In short, they make input replacements and configure production to exploit transportation framework enhancements boosting the economy of the country.
Companies always want to get their products from a cheap but diverse market because it increases their margins. This usually includes offshore sourcing, for which companies need transportation and logistics for longer distances.
The lower costs of logistics and transport that can be achieved through proper freight movement, the more financially rewarding for the companies to import and export from international suppliers.
Inadequate infrastructure such as congestion or worn-out roads causes greater costs for logistics and transportation, which is less economical for companies to go to global markets.
This bill will have a huge impact on the environment as logistic operations have increased the air and land pollution which not only impacts the environment but the economy as well.
With better infrastructure, the logistic operations will improve, consequently reducing industrial wastage and air pollution.
Safety and diversity
Decision-makers have to collectively integrate an adequate plan for the safety considerations. Capital expense and public operating budget are mostly the direct beneficiary.
Other economic impacts include job opportunities, or loss of projects is usually mentioned, particularly in high investments where several stakeholders and companies are affected. An increase in the supply chain will create more job opportunities for the people boosting the economy.
Supply chains, which are more resilient and adaptable, are secure and diverse. This project of $571 billion infrastructure has the potential to enhance the domestic production, adequate stockpiles, built-in redundancies, increase range of supply, facilitate safe and secure digital networks, and boost in US manufacturing base and working class.
Furthermore, the partners and allies of the US would be willing to cooperate on these adaptable supply chains for collective economic growth.
In the initial stage, the US government emphasizes the supply chains of four sectors, which are pharmaceuticals, semiconductors, rare earth elements, and large capacity batteries. They are also planning to add more sectors in the first years of Biden’s Presidency.
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