Today’s History Lesson: What is the Defense Production Act?
March 18th | 2020
Those of you who saw Donald Trump’s press conference saw that he enacted the Defense Production Act in an effort to get more supplies of personal protective equipment through to our front-line medical personnel. This is an old set of rules, last enacted during the Korean War timeframe.
In brief layman’s terms, it gives our government the right to tell private companies what to manufacture in their privately-owned manufacturing facilities during war and certain other times of crisis.
The Defense Production Act (DPA) was inspired by the War Powers Acts of World War II. The scope of DPA has expanded over the years and now extends beyond military preparedness and capabilities. The DPA may be used to enhance and support domestic preparedness, response, and recovery from natural hazards, terrorist attacks, and other national emergencies.
According to the Congressional Research Service, a few examples of some current DPA authorities include:
Title I: Priorities and Allocations, which allows the President to require persons (including businesses and corporations) to prioritize and accept contracts for materials and services as necessary to promote the national defense.
Title III: Expansion of Productive Capacity and Supply, which allows the President to incentivize the domestic industrial base to expand the production and supply of critical materials and goods. Authorized incentives include loans, loan guarantees, direct purchases and purchase commitments, and the authority to procure and install equipment in private industrial facilities.
Title VII: General Provisions, which includes key definitions for the DPA and several distinct authorities, including the authority to establish voluntary agreements with private industry; the authority to block proposed or pending foreign corporate mergers, acquisitions, or takeovers that threaten national security; and the authority to employ persons of outstanding experience and ability and to establish a volunteer pool of industry executives who could be called to government service in the interest of the national defense.
The President has the power to exercise the authorities of the DPA, but generally delegates the task to the relevant department and agency heads. While the use of the DPA’s authorities is most commonly associated with a need stemming from the Department of Defense (DOD), they can and have been used by numerous other agencies.
This seems like an extraordinary power to wield, but as some news outlets have pointed out, it actually happens pretty regularly without much fanfare, though on a much smaller scale. In fact, last summer President Trump invoked the act to increase the production of rare-earth magnets out of concern that China would restrict exports of those materials. Although it is a tool of the Executive branch, the DPA lies within the legislative jurisdiction of the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs.
Since 1950 the DPA has been reauthorized over 50 times, though significant authorities were terminated from the original law long ago. Many of the authorities are set to expire in 2025, though there are a few that have been made permanent by Congress; like the Exon-Florio Amendment, which established government review of the acquisition of U.S. companies by foreigners.