Defense Production Act could help amid coronavirus, even as President Trump resists: experts

The emergency law could help "light a fire," one economist said.

March 25, 2020, 5:50 PM

President Donald Trump's continued resistance to use his emergency powers to compel companies to produce medical supplies needed in the fight against the novel coronavirus has drawn a bipartisan chorus of criticism.

Experts say it could jumpstart domestic production, though global constraints may limit how quickly it could make an impact.

Trump has yet to put the Korean War-era Defense Production Act (DPA) into practice, instead leaving private companies to volunteer their production lines and states to compete for contracts of masks, ventilators, gowns and other essential supplies to treat patients suffering from COVID-19.

Medical supplies are seen inside the Jacob Javits Center as New York Governor Andrew Cuomo announces plans to convert the Jacob Javits Center into a field hospital as coronavirus cases continue to rise, March 23, 2020, in New York.
Bryan R. Smith/AFP/Getty Images

But as hard-hit states and hospitals have said they are not getting the supplies they need from the federal government or private companies' donation, experts say that elevating the federal response by compelling certain aspects of production could better coordinate the relatively ad-hoc production shifts and donations thus far.

"The private sector is responding with some action here, but it couldn't hurt to have the federal government trying to light a fire under the process," Ethan Harris, head of global economics research for Bank of America, told ABC News.

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The DPA provides the president with the power to direct civilian businesses to help meet orders for products necessary for the national defense. Congress passed it in 1950 and has since gradually expanded its scope to include homeland security and domestic emergency management.

The act gives the Trump administration the ability to force companies to sign contracts and impose wage and price controls, among other stipulations. In the case of the coronavirus, Trump could compel companies to produce a certain number of ventilators, respirators or other needed medical supplies.

Trump has repeatedly claimed he has "invoked" the act, but in practice, it does not appear his administration has actually used it.

On Tuesday morning, Federal Emergency Management Agency Administrator Peter Gaynor said the government planned to use the act for the first time to "get our hands on" 60,000 COVID-19 testing kits. Lizzie Kitzow, an agency spokesperson, then said the government was in the end "able to procure the test kits from the private market" without using the DPA.

Gaynor said it would also be used Tuesday to insert language into a contract for masks. FEMA did not respond to ABC News' question about whether that actually happened.

The Defense Department, meanwhile, has worked with FEMA and the Department of Health and Human Services to determine how it might carry out the DPA if desired by the White House. So far, there have been no formal requests, according to Ellen Lord, the undersecretary of defense for acquisitions and sustainment.

Trump on Tuesday argued that "the threat" of him using the act provides leverage over companies that so far, in his view, have stepped up to the task.

"It's called leverage," Trump said. "You don't have to use it from the standpoint of actually, it's been activated, but you don't have to use it."

He added, "But the threat of it being there is great leverage and companies are doing as we ask and companies are actually even better than that."

Nassau County police lead a donation drive to collect medical equipment such as N95 surgical masks, nitrile gloves, tyvex suits, antibacterial and disinfecting wipes to battle the coronavirus pandemic, March 24, 2020. in East Meadow, New York.
Al Bello/Getty Images

Governors and members of Congress have called on Trump to use the law, saying not doing so is hampering the nation's ability to meet the demand for medical supplies.

Sixteen attorneys general this week also sent a letter to the president, calling on him to immediately and "fully utilize" the DPA "to prioritize the production of masks, respirators, and other critical items."

The vast majority of the medical supplies -- and raw materials for those supplies -- come from China and other low-wage countries that the U.S. has now found itself relying on. At the same time, many countries around the world are desperately seeking out the same equipment, drastically driving up prices as demand surges.

Unlike the United States, China has seized the opportunity, using its centralized, command-and-control economy to rapidly reset supply chains and churn out ventilators and personal protective equipment, according to Nick Vyas, the executive director of the Center for Global Supply Chain Management at the University of Southern California.

"We are missing the opportunity to take the leadership," Vyas told ABC News. "We are missing the opportunity to prepare our public health response."

The Trump administration is in the unique position to play a critical role at a time of national crisis, and the DPA would "absolutely" help, he said.

"We can certainly create internal capacity for the oncoming demand we anticipate," Vyas said. "I think the federal government needs to insert itself in two ways: infusing the capital and creating an incentive."

Trump has explained that he does not like "the concept of nationalizing our business" by employing the act -- although the law's levers give him ways to get involved in much less intrusive ways.

"Call a person over in Venezuela," Trump told reporters at the White House Sunday. "Ask them how did nationalization of their businesses work out. Not too well."

New York Gov. Andrew Cuomo, though, said that he spoke to businesses that "would welcome it."

PHOTO: New York Governor Andrew Cuomo speaks in front of stacks of medical protective supplies during a news conference at the Jacob K. Javits Convention Center, in New York.
New York Governor Andrew Cuomo speaks in front of stacks of medical protective supplies during a news conference at the Jacob K. Javits Convention Center, which will be partially converted into a temporary hospital during the outbreak of the coronavirus in New York, March 24, 2020.
Mike Segar/Reuters

"It’s actually a pro-business mentality, not an anti-business mentality," Cuomo told reporters on Tuesday.

But having the federal government insert itself into the intricate details of companies' business affairs could slow down production if it created more bureaucracy and red tape, said Steve Ganyard, an ABC News contributor and former deputy assistant secretary of state.

"You have to be careful what you ask for when you get the federal government involved in something like this," Ganyard said. "The best thing to do is to just write a check."

Whether the DPA is employed now may not necessarily have an immediate impact anyway, since it takes time to repurpose factories and shift companies to producing medical gear, according to Kaitlin Wowak, an assistant professor at the Mendoza College of Business, who specializes in supply chains.

"If we responded a little bit faster about trying to increase production or pivot supply chains, then we could have avoided a lag," Wowak told ABC News.

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Still, it's not too late, experts say, as the U.S. seeks to ramp up its supply of ventilators and other key equipment as the spread of COVID-19 creates more hotspots across the country -- and threatens more waves of infection.

"It is a good idea to be using the act to try and direct production," Bank of America's Harris said. "But I think we have to be realistic about how quickly you can achieve the goals."

ABC News' Libby Cathey, Jack Arnholz and Luis Martinez contributed to this report.

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